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| Title: |
A Model of Time-on-market and Real Estate Price Under Sequential Search with Recall |
| Author(s): |
Ping Cheng, Zhenguo Lin, Yingchun Liu |
| Journal: |
Real Estate Economics
Volume 36,
Issue 4,
2008 |
This paper develops a model and provides a closed-form formula to uncover the theoretical relationship between real estate price and time-on-market (TOM). Our model shows a nonlinear positive price-TOM relationship, and it identifies three economic factors that affect the impact of TOM on sale price. We demonstrate that conventional metrics for real estate return and risk, which are borrowed in a na�ve fashion from finance theory, do not account for marketing period risk and tend to over-estimate real estate returns and under-estimate real estate risks. Our model provides a simple way to correct such bias. This theory helps to explain the apparent �risk-premium puzzle� in real estate. |
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