Arbitrage opportunities, efficiency, and the role of risk preferences in the Hong Kong property market

© 2016, © Emerald Group Publishing Limited. Purpose: This paper aims to investigate how a prospective buyer’s optimal home-size purchase can be determined by means of a stochastic-dominance (SD) analysis of the historical data of Hong Kong. Design/methodology/approach: By means of SD analysis, the p...

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Main Authors: Chun Kei Tsang, Wing Keung Wong, Ira Horowitz
Format: Journal
Published: 2018
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Online Access:https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=84990817492&origin=inward
http://cmuir.cmu.ac.th/jspui/handle/6653943832/55669
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Institution: Chiang Mai University
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spelling th-cmuir.6653943832-556692018-09-05T02:59:35Z Arbitrage opportunities, efficiency, and the role of risk preferences in the Hong Kong property market Chun Kei Tsang Wing Keung Wong Ira Horowitz Economics, Econometrics and Finance © 2016, © Emerald Group Publishing Limited. Purpose: This paper aims to investigate how a prospective buyer’s optimal home-size purchase can be determined by means of a stochastic-dominance (SD) analysis of the historical data of Hong Kong. Design/methodology/approach: By means of SD analysis, the paper uses monthly property yields in Hong Kong over a 15-year period to illustrate how buyers of different risk preference may optimize their home-size purchase. Findings: Regardless of whether the buyer eschews risk, embraces risk or is indifferent to it, in any adjacent pairing of five well-defined housing classes, the smaller class provides the optimal purchase. In addition, risk-averters focusing on total yield would prefer to invest in the smallest and second-smallest classes than in the largest class. Research limitations/implications: As the smaller class provides the optimal purchase, the smallest class affords the buyer the optimal purchase over all classes in this important housing market – at least where rental yields are of primary concern. Practical implications: The findings suggest that in the Hong Kong housing market, long-term investors may be better off purchasing smaller homes. For other type of investors, it depends on their risk preference. Originality/value: There is a very small body of empirical literature on housing investment, especially if the focus is on the optimal home-size purchase. 2018-09-05T02:59:35Z 2018-09-05T02:59:35Z 2016-01-01 Journal 10867376 2-s2.0-84990817492 10.1108/SEF-03-2015-0079 https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=84990817492&origin=inward http://cmuir.cmu.ac.th/jspui/handle/6653943832/55669
institution Chiang Mai University
building Chiang Mai University Library
country Thailand
collection CMU Intellectual Repository
topic Economics, Econometrics and Finance
spellingShingle Economics, Econometrics and Finance
Chun Kei Tsang
Wing Keung Wong
Ira Horowitz
Arbitrage opportunities, efficiency, and the role of risk preferences in the Hong Kong property market
description © 2016, © Emerald Group Publishing Limited. Purpose: This paper aims to investigate how a prospective buyer’s optimal home-size purchase can be determined by means of a stochastic-dominance (SD) analysis of the historical data of Hong Kong. Design/methodology/approach: By means of SD analysis, the paper uses monthly property yields in Hong Kong over a 15-year period to illustrate how buyers of different risk preference may optimize their home-size purchase. Findings: Regardless of whether the buyer eschews risk, embraces risk or is indifferent to it, in any adjacent pairing of five well-defined housing classes, the smaller class provides the optimal purchase. In addition, risk-averters focusing on total yield would prefer to invest in the smallest and second-smallest classes than in the largest class. Research limitations/implications: As the smaller class provides the optimal purchase, the smallest class affords the buyer the optimal purchase over all classes in this important housing market – at least where rental yields are of primary concern. Practical implications: The findings suggest that in the Hong Kong housing market, long-term investors may be better off purchasing smaller homes. For other type of investors, it depends on their risk preference. Originality/value: There is a very small body of empirical literature on housing investment, especially if the focus is on the optimal home-size purchase.
format Journal
author Chun Kei Tsang
Wing Keung Wong
Ira Horowitz
author_facet Chun Kei Tsang
Wing Keung Wong
Ira Horowitz
author_sort Chun Kei Tsang
title Arbitrage opportunities, efficiency, and the role of risk preferences in the Hong Kong property market
title_short Arbitrage opportunities, efficiency, and the role of risk preferences in the Hong Kong property market
title_full Arbitrage opportunities, efficiency, and the role of risk preferences in the Hong Kong property market
title_fullStr Arbitrage opportunities, efficiency, and the role of risk preferences in the Hong Kong property market
title_full_unstemmed Arbitrage opportunities, efficiency, and the role of risk preferences in the Hong Kong property market
title_sort arbitrage opportunities, efficiency, and the role of risk preferences in the hong kong property market
publishDate 2018
url https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=84990817492&origin=inward
http://cmuir.cmu.ac.th/jspui/handle/6653943832/55669
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