Finance Webinar（2020-21)

Topic: Valuation of Long-Term Property Rights under Political Uncertainty

Speaker: Zhiguo He, University of Chicago and NBER

Time: Wednesday, 25 November,10:00-11:30 AM Beijing Time

Location: Microsoft Teams Online Conference Room

Abstract:

We empirically analyze pricing of political uncertainty in long-term property rights, guided by a theoretical model of housing assets subject to contract extension in the remote future. To identify exposure to political uncertainty, we exploit a unique variation around land lease extension protection beyond 2047 in Hong Kong’s housing market due to the historical arrangements under the “One Country, Two Systems” design. Relative to properties that have been promised an extension protection, those with legally unprotected leases granted by the current Hong Kong government are sold at a substantial discount of around 8%. Similar contracts issued during the colonial era suffer an additional discount of about 8% due to their reneging risk. Our parsimonious model matches well the estimated discounts across long-term lease horizons, and implies that to extend their leases homeowners expect about 25% of penalty on ground rent after 2047. The discount is higher when people’s confidence declines and where residents feel more uncertain of the city’s future.

Introduction:

Professor Zhiguo He is the Fuji Bank and Heller Professor of Finance and Jeuck Faculty Fellow, Director of Becker Friedman Center China (BFI-China), and Faculty Co-Director of Fama-Miller Center at the University of Chicago, Booth School of Business. Professor Zhiguo He and was the Dean’s Distinguished Visiting Scholar at Stanford University, Graduate School of Business, and is serving the Special-term Alibaba Foundation Professor at Tsinghua University, School of Economics and Management, and the member of Academic Committee of Luohan Academy.

Professor He’s research focuses on agency frictions and debt maturities in financial markets and macroeconomics, with a special focus on contract theory and banking. He is also conducting active academic research on Chinese financial markets and the area of FinTech, especially the Blockchain technology and its potential business applications.

Professor He received his bachelor and master degrees from Tsinghua University in Beijing, and holds a PhD degree from Kellogg School of Management at Northwestern University in 2008. He has been named a 2014 Alfred P. Sloan Research Fellow, and has won numerous awards for his outstanding scholastic record, including Lehman Brothers Fellowship for Research Excellence in Finance in 2007, the Swiss Finance Institute Outstanding Paper Award in 2012, the Smith-Breeden First Prize in 2012 and the Brattle Group First Prize in 2014.

Your participation is warmly welcomed!