We test for the existence of housing bubbles associated with a failure of the transversality condition that requires the present value of payments occurring infinitely far in the future to be zero. The most prominent such bubble is the classic rational bubble. We study housing markets in the United Kingdom and Singapore, where residential property ownership takes the form of either leaseholds or freeholds. Leaseholds are finite‐maturity, pre‐paid, and tradeable ownership contracts with maturities often exceeding 700 years. Freeholds are infinite‐maturity ownership contracts. The price difference between leaseholds with extremely‐long maturities and freeholds reflects the present value of a claim to the freehold after leasehold expiry, and is thus a direct empirical measure of the transversality condition. We estimate this price difference, and find no evidence of failures of the transversality condition in housing markets in the U.K. and Singapore, even during periods when a sizable bubble was regularly thought to be present.
-
Faculty
- Academic Areas
- Awards & Honors
- Seminars
-
Conferences
- Accounting Summer Camp
- California Econometrics Conference
- California Quantitative Marketing PhD Conference
- California School Conference
- China India Insights Conference
-
Initiative on Business and Environmental Sustainability
- Political Economics (2023–24)
- Scaling Geologic Storage of CO2 (2023–24)
- A Resilient Pacific: Building Connections, Envisioning Solutions
- Adaptation and Innovation
- Changing Climate
- Civil Society
- Climate Impact Summit
- Climate Science
- Corporate Carbon Disclosures
- Earth’s Seafloor
- Environmental Justice
- Finance
- Marketing
- Operations and Information Technology
- Organizations
- Sustainability Reporting and Control
- Taking the Pulse of the Planet
- Urban Infrastructure
- Watershed Restoration
- Junior Faculty Workshop on Financial Regulation and Banking
- Ken Singleton Celebration
- Kreps Symposium
- Marketing Camp
- Quantitative Marketing PhD Alumni Conference
- Theory and Inference in Accounting Research
- Voices
- Publications
- Books
- Working Papers
- Case Studies
- Postdoctoral Scholars
-
Research Labs & Initiatives
- Cities, Housing & Society Lab
- Corporate Governance Research Initiative
- Corporations and Society Initiative
- Golub Capital Social Impact Lab
- Initiative for Financial Decision-Making
- Policy and Innovation Initiative
- Rapid Decarbonization Initiative
- Stanford Latino Entrepreneurship Initiative
- Value Chain Innovation Initiative
- Venture Capital Initiative
- Behavioral Lab
- Data, Analytics & Research Computing