<![CDATA[Hedgehogs.net: '' related content]]> http://www.hedgehogs.net/tag/economic+theories?view=rss http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11344137/a-default-prediction-model-for-italian-smes-the-relevance-of-the-capital-structure Fri, 18 Jul 2014 23:43:32 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11344137/a-default-prediction-model-for-italian-smes-the-relevance-of-the-capital-structure <![CDATA[A default prediction model for Italian SMEs: the relevance of the capital structure]]> ]]> 11344137 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11344135/how-does-market-value-earnings-smoothing-under-uncertainty Fri, 18 Jul 2014 23:43:29 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11344135/how-does-market-value-earnings-smoothing-under-uncertainty <![CDATA[How does market value earnings smoothing under uncertainty?]]> ]]> 11344135 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11343974/the-fed-is-already-creating-the-next-bubble Fri, 18 Jul 2014 23:03:54 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11343974/the-fed-is-already-creating-the-next-bubble <![CDATA[The Fed is already creating the next bubble]]>

Last week, I wrote a fairly comprehensive piece laying out some of the macro issues around the Fed and other central banks’ ultra-easy monetary policy. The gist of that piece was that, due to the political economy, monetary policy is now seen by policy makers as a good way to ‘steer’ the cyclical economy through peaks and troughs. Fiscal policy, while used effectively during the depths of crisis in 2008 and 2009, is largely off the table.

read more...

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http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11343002/ifdp1107-understanding-the-great-recession Fri, 18 Jul 2014 15:23:26 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11343002/ifdp1107-understanding-the-great-recession <![CDATA[IFDP1107: Understanding the Great Recession]]> 11343002 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11342354/may-numbers-long-equity-beats-eventdriven-peers-in-asia Fri, 18 Jul 2014 10:50:50 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11342354/may-numbers-long-equity-beats-eventdriven-peers-in-asia <![CDATA[May Numbers: Long Equity Beats Event-Driven Peers in Asia]]> 11342354 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11339619/advance-disclosure-of-insider-trading Tue, 15 Jul 2014 07:25:43 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11339619/advance-disclosure-of-insider-trading <![CDATA[Advance Disclosure of Insider Trading]]> Using a strategic rational expectations equilibrium framework, we show that forcing a well-informed insider to disclose her trades in advance tends to increase welfare for both the insider and less-informed outsiders. Advance disclosure generates price risk for the insider, and to mitigate this risk, the insider trades less aggressively on her private information. Consequently, outsiders face lower adverse selection costs, which improves risk sharing and increases welfare. The drop in trading aggressiveness also causes market efficiency to decline. Furthermore, pretrade disclosure encourages excessive risk taking but may either encourage or discourage managerial effort.

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http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11338384/securities-litigation-without-the-efficient-market-hypothesis Sun, 13 Jul 2014 13:29:56 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11338384/securities-litigation-without-the-efficient-market-hypothesis <![CDATA[Securities litigation without the efficient market hypothesis]]>

The Supreme Court in the US has just made a ruling that corporate misstatements is perhaps not so important if market prices are already imperfect. According to the NYTimes,

read more...

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http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11337104/house-prices-real-prices-and-pricetorent-ratio-decline-slightly-in-april Sat, 28 Jun 2014 22:38:05 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11337104/house-prices-real-prices-and-pricetorent-ratio-decline-slightly-in-april <![CDATA[House Prices: Real Prices and Price-to-Rent Ratio decline slightly in April]]> I've been expecting a slowdown in year-over-year prices as "For Sale" inventory increases, and it appears the slowdown has started.   The Case-Shiller Composite 20 index was up 10.8% year-over-year in April; the smallest year-over-year increase since early 2013.   Still, this is a very strong year-over-year change.

On a seasonally adjusted monthly basis, the Case-Shiller Composite 20 index was up 0.2% in April - and the Composite 10 was close to unchanged - the smallest monthly increase since prices bottomed in early 2012.

On a real basis (inflation adjusted), prices actually declined slightly for the first time since 2012.  The price-rent ratio also declined slightly in April for the Case-Shiller Composite 20 index.

It is important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $278,000 today adjusted for inflation (39%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

Nominal House Prices

Nominal House PricesThe first graph shows the quarterly Case-Shiller National Index SA (through Q1 2014), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through April) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to mid-2004 levels (and also back up to Q2 2008), and the Case-Shiller Composite 20 Index (SA) is back to November 2004 levels, and the CoreLogic index (NSA) is back to December 2004.

Real House Prices

Real House PricesThe second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to Q4 2001 levels, the Composite 20 index is back to August 2002, and the CoreLogic index back to December 2002.

In real terms, house prices are back to early '00s levels.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to Q1 2002 levels, the Composite 20 index is back to December 2002 levels, and the CoreLogic index is back to April 2003.

In real terms, and as a price-to-rent ratio, prices are mostly back to early 2000 levels.

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http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11337101/caseshiller-comp-20-house-prices-increased-108-yearoveryear-in-april Sat, 28 Jun 2014 22:37:57 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11337101/caseshiller-comp-20-house-prices-increased-108-yearoveryear-in-april <![CDATA[Case-Shiller: Comp 20 House Prices increased 10.8% year-over-year in April]]> S&P/Case-Shiller released the monthly Home Price Indices for April ("April" is a 3 month average of February, March and April prices).

This release includes prices for 20 individual cities, and two composite indices (for 10 cities and 20 cities).

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Rate of Home Price Gains Drop Sharply, According to the S&P/Case-Shiller Home Price Indices
Data through April 2014, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices ... show that the 10-City and 20-City Composites posted annual gains of 10.8%. This is a significantly lower rate when compared to last month. Nineteen of the 20 cities saw lower annual gains in April than in March.

The 10-City and 20-City Composites increased 1.0% and 1.1% in April. Seven cities – Cleveland, Las Vegas, Los Angeles, Miami, Phoenix, San Diego and San Francisco – reported lower returns than in March. ...

“Although home prices rose in April, the annual gains weakened,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “Overall, prices are rising month-to-month but at a slower rate. Last year some Sunbelt cities were seeing year-over-year numbers close to 30%, now all are below 20%: Las Vegas (18.8%), Los Angeles (14.0%), Phoenix (9.8%), San Diego (15.3%) and San Francisco (18.2%). Other cities around the nation are also experiencing slower price increases."
...
In April, all cities saw prices increase with twelve cities reporting higher returns than last month. Boston gained the most with an increase of 2.9%, its highest month-over-month gain. San Francisco and Seattle trailed at +2.3%. At the bottom of the list, New York gained only 0.1%. Dallas and Denver continue to set new peaks while Detroit remains the only city below its January 2000 value.
Case-Shiller House Prices Indices Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 17.8% from the peak, and unchanged in April (SA). The Composite 10 is up 24.4% from the post bubble low set in Jan 2012 (SA).

The Composite 20 index is off 16.9% from the peak, and up 0.2% (SA) in April. The Composite 20 is up 25.2% from the post-bubble low set in Jan 2012 (SA).

Case-Shiller House Prices Indices The second graph shows the Year over year change in both indices.

The Composite 10 SA is up 10.8% compared to April 2013.

The Composite 20 SA is up 10.8% compared to April 2013.

Prices increased (SA) in 15 of the 20 Case-Shiller cities in April seasonally adjusted.  (Prices increased in 20 of the 20 cities NSA) Prices in Las Vegas are off 43.6% from the peak, and prices in Denver and Dallas are at new highs (SA).

This was lower than the consensus forecast for a 11.4% YoY increase and suggests a slowdown in price increases. I'll have more on house prices later.

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http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11336914/house-prices-real-prices-and-pricetorent-ratio-decline-slightly-in-april Wed, 25 Jun 2014 20:09:05 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11336914/house-prices-real-prices-and-pricetorent-ratio-decline-slightly-in-april <![CDATA[House Prices: Real Prices and Price-to-Rent Ratio decline slightly in April]]> I've been expecting a slowdown in year-over-year prices as "For Sale" inventory increases, and it appears the slowdown has started.   The Case-Shiller Composite 20 index was up 10.8% year-over-year in April; the smallest year-over-year increase since early 2013.   Still, this is a very strong year-over-year change.

On a seasonally adjusted monthly basis, the Case-Shiller Composite 20 index was up 0.2% in April - and the Composite 10 was close to unchanged - the smallest monthly increase since prices bottomed in early 2012.

On a real basis (inflation adjusted), prices actually declined slightly for the first time since 2012.  The price-rent ratio also declined slightly in April for the Case-Shiller Composite 20 index.

It is important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $278,000 today adjusted for inflation (39%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

Nominal House Prices

Nominal House PricesThe first graph shows the quarterly Case-Shiller National Index SA (through Q1 2014), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through April) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to mid-2004 levels (and also back up to Q2 2008), and the Case-Shiller Composite 20 Index (SA) is back to November 2004 levels, and the CoreLogic index (NSA) is back to December 2004.

Real House Prices

Real House PricesThe second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to Q4 2001 levels, the Composite 20 index is back to August 2002, and the CoreLogic index back to December 2002.

In real terms, house prices are back to early '00s levels.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to Q1 2002 levels, the Composite 20 index is back to December 2002 levels, and the CoreLogic index is back to April 2003.

In real terms, and as a price-to-rent ratio, prices are mostly back to early 2000 levels.

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