| Authors | Title |
|---|---|
| Xiao, Steven Chong and Xiao, Serena Wenjing | Housing Stability and New Business Creation SSRN, May 1, 2024
Abstract We investigate whether and how stronger legal protections for renters affect business creation by enhancing housing stability. In California, city ordinances protecting renters from arbitrary evictions led to a 9.9% increase in new businesses, with significant growth among female (8.0%) and racial-minority (12.1%) entrepreneurs. These businesses survive in the long term and perform comparably to others. Household-level analysis reveals that after the laws’ passage, renters are less likely to move, more likely to pursue self-employment and generate higher business income. Our findings indicate that enhancing housing stability contributes positively to the local economy by fostering self-employment and job creation. |
| Zhang, Harold and Zhao, Xiaofei | Neglected Risks in the Communication of Mortgage-Backed Security Offerings Journal of Finance, vol. 79 no. 1, February 2024, pages 129-172 Abstract Examining the contractual disclosures during the sale of private-label residential mortgage-backed securities before the 2008 financial crisis, we find that textual contents in the risk-factor section predict subsequent losses and were not reflected in pricing. Insurance companies, especially life insurers, and insurers with low regulatory capital ratios, are more exposed to textual risks. Consistent with issuers hedging litigation risks with disclosure, we find that textual contents are associated with second-lien underreporting and preissuance of written communications. Overall, we find that investors neglected risks in the purportedly safe assets before the crisis. |
| Xiao, Serena Wenjing | Real Estate Investors and Property Taxation SSRN, September 23, 2023 Abstract This paper studies the inequality in property taxation in the U.S. single-family home market based on a property’s assessed value. Comparing the assessment ratio of properties owned by investors with those of owner-occupiers, we find a 3.0%–4.7% assessment discount nationwide for properties owned by large investors (i.e., those owning more than 100 properties) relative to owner-occupied homes in the same areas. This difference translates into an estimated total annual property tax savings of $66–$104 million for large investors across the country. Further evidence based on micro-level appeals data in Cook County, Illinois and Florida suggests that the institutional assessment discount results from a higher likelihood of appeal and more favorable outcomes upon a successful appeal for large investors. States with a fairer property taxation administration, a higher market share by large investors and a higher property tax burden show a greater assessment discount for large investors. |
| Ganduri, Rohan, Xiao, Steven Chong and Xiao, Serena Wenjing | Tracing the Source of Liquidity for Distressed Housing Markets Real Estate Economics, vol. 51, no. 2, March 2023, pages 408-440 Abstract We show that profit-seeking institutional investors provide valuable liquidity and spur the recovery of distressed housing markets. Using a quasi-natural experiment wherein investors purchased prepackaged distressed home portfolios from government-sponsored enterprises, we find that transaction prices of properties located within 0.25 miles of bulk-sale properties increased by 1.4% more than homes located farther away. This positive price spillover effect helped reverse the discounts at which such properties were being sold prior to the bulk-sale event. The price spillover effect due to the bulk-sale event is greater for foreclosed homes (4.1%), homes similar to bulk-sale homes (2.5%) and homes in highly distressed neighborhoods (7.0%). Our results highlight asset disposition through pooling and institutional participation as a potential market-driven channel for the recovery of distressed housing markets. |
| Gurun, Umit G., Wu, Jiabin, Xiao, Steven Chong and Xiao, Serena Wenjing | Do Wall Street Landlords Undermine Renters’ Welfare? The Review of Financial Studies, vol. 36, no. 1, January 2023, pages 70-121 Abstract We examine the recent rise of institutional investment in the single-family home rental market and its implications for renters’ welfare. Using institutional mergers to identify local exogenous variation in institutional landlords’ scale and market share, we show that rents increase in neighborhoods where both merging firms owned properties (i.e., overlapped neighborhoods) relative to other nonoverlapped neighborhoods. Meanwhile, the crime rate also significantly decreases in overlapped neighborhoods after mergers. Our findings suggest that while institutional landlords leverage their market power to extract greater surplus from renters, they also improve the quality of rental services by enhancing neighborhood safety. |
| Wei, Bin and Zhao, Feng | Racial Disparities in Mortgage Lending: New Evidence Based on Processing Time The Review of Corporate Finance Studies, vol. 11, no. 3, August 2022, pages 775-813 Abstract This paper examines racial disparities in mortgage processing time prior to the global financial crisis. We find that Black borrowers are underrepresented and experience a longer processing time than white borrowers among the mortgages securitized by government-sponsored enterprises (GSEs). At the same time, Black borrowers are overrepresented and face a similar processing time among privately securitized (PLS) mortgages. Additionally, Black borrowers are strongly associated with faster segments of the mortgage markets, faster lenders within each segment and the types of loan products that are processed faster, all of which subsequently experienced higher defaults. |
| Arentsen, Eric, Mauer, David, Rosenlund, Brian, and Zhang, Harold | Subprime Mortgage Defaults and Credit Default Swaps The Journal of Finance, vol. 70, no. 2, April 2015, pages 689-731 Abstract We offer the first empirical evidence on the adverse effect of credit default swap (CDS) coverage on subprime mortgage defaults. Using a large database of privately securitized mortgages, we find that higher defaults concentrate in mortgage pools with concurrent CDS coverage, and within these pools the loans originated after or shortly before the start of CDS coverage have an even higher delinquency rate. The results are robust across zip code and origination quarter cohorts. Overall, we show that CDS coverage helped drive higher mortgage defaults during the financial crisis. |
Research
Authors
Harold Huibing Zhang
Area Coordinator, Finance and Managerial Economics
Steven Xiao
Associate Professor, Finance and Managerial Economics PhD Area Coordinator, Finance, PhD Programs
