Real-estate bubble | EPFL Graph Search

A real-estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets, and it typically follows a land boom. A land boom is a rapid increase in the market price of real property such as housing until they reach unsustainable levels and then declines. This period, during the run-up to the crash, is also known as froth. The questions of whether real estate bubbles can be identified and prevented, and whether they have broader macroeconomic significance, are answered differently by schools of economic thought, as detailed below. Bubbles in housing markets are more critical than stock market bubbles. Historically, equity price busts occur on average every 13 years, last for 2.5 years, and result in about a 4 percent loss in GDP. Housing price busts are less frequent, but last nearly twice as long and lead to output losses that are twice as large (IMF World Economic Outlook, 2003). A recent laboratory experimental study also shows that, compared to financial markets, real estate markets involve more extended boom and bust periods. Prices decline slower because the real estate market is less liquid. The financial crisis of 2007–2008 was related to the bursting of real estate bubbles that had begun in various countries during the 2000s. As with all types of economic bubbles, disagreement exists over whether or not a real estate bubble can be identified or predicted, then perhaps prevented. Speculative bubbles are persistent, systematic and increasing deviations of actual prices from their fundamental values. Real estate bubbles can be difficult to identify even as they are occurring, due to the difficulty of discerning the intrinsic value of real estate. As with other medium and long range economic trends, accurate prediction of future bubbles has proven difficult. In real estate, fundamentals can be estimated from rental yields (where real estate is then considered in a similar vein to stocks and other financial assets) or based on a regression of actual prices on a set of demand and/or supply variables.

The triangular value of patents

Albina Khairullina

This thesis addresses the question of a patent value from three different angles. It comprises three papers on the patent valuation methods. The patent valuation issues are well-known to the world of research and practice. However, the debates over what the patent contributes to the business and the economy overall remain open. The main contribution of my dissertation is that I present novel ways of addressing the value of patents from both micro- and macroeconomic perspectives. I bridge the theoretical modeling with real-world estimations, which sheds light on the legitimacy of certain hypothetical assumptions in patent valuation. In the first paper, I develop a factor model to value patents in a corporate patent portfolio. According to the results, the patent value is determined by five factors, such as forward and backward citations, family size, the number of oppositions received, and the number of claims. I contribute to the literature by introducing an interaction of a quantitative measure of a patent value with its qualitative assessment derived from a survey of patent managers. The results show that model estimates are weakly consistent with an expert opinion on the value of patents. In the second paper, we collaborate with a large multinational company and analyze internal and highly confidential data on product sales, revenues, and other corporate performance measures by tracing each patent down to its product market. To establish causality, we design a randomized controlled trial together with the management of the company, in which some randomly chosen patents are dropped from the portfolio, while others are kept for the duration of the study. To our knowledge, this is the first study that conducts a randomized controlled trial to measure the real market effect of patent protection. In the third paper, we study whether the regulator expands production possibilities of the economy by assigning a standard-essential status to patents. As we show, the innovatorsâ risk of losing the standard-setting game ex-ante attenuates the anticipation of a larger market share. Secondly, since the discovery of new technologies is typically slower than the discounting rate for the monopoly profits, standards with a positive contribution to productivity tend to be growth-reducing. Our results have significant policy implications. Regulators impose Fair, Reasonable, And Non-Discriminatory (FRAND) pricing on standard-essential technologies to compensate for the larger market-share the innovators get. We demonstrate how FRAND regulation of mark-ups has an unambiguously negative effect on growth and long-term growth-destroying consequences.

EPFL2020

The triangular value of patents

Albina Khairullina

EPFL2020