Examining Competition in Land Market: An Application of Event Study to Land Auctions in Hong Kong

University of Wisconsin-Madison, Center for Urban Land Economics Research Working Paper No. 2001-02

28 Pages Posted: 16 Feb 2001

See all articles by Stephen Ching

Stephen Ching

School of Economics and Finance, The University of Hong Kong

Yuming Fu

National University of Singapore

Date Written: February 2001

Abstract

The extent to which the developers are able to earn economic profits on their land acquisitions reflects the competition in the land market. We apply event study analysis to government land auctions in Hong Kong to detect such economic profits. When the auction price of a site falls short of its competitive market value, the winner's market value is enhanced, entailing a positive abnormal return on its stock, as a result of the anticipated economic profit in the development of the site. We find a positive average abnormal return for the auctions between 1986 and 1998 where the winner is a publicly listed firm. Moreover, we find higher abnormal returns for more valuable sites and when land market conditions discourage competition. We suggest several areas where government policies may help enhance competition in the land market.

Keywords: Land market, competition, auctions, event study, Hong Kong

JEL Classification: D43, D44, R31, R52

Suggested Citation

Ching, Stephen and Fu, Yuming, Examining Competition in Land Market: An Application of Event Study to Land Auctions in Hong Kong (February 2001). University of Wisconsin-Madison, Center for Urban Land Economics Research Working Paper No. 2001-02, Available at SSRN: https://ssrn.com/abstract=259927 or http://dx.doi.org/10.2139/ssrn.259927

Stephen Ching

School of Economics and Finance, The University of Hong Kong ( email )

Pokfulam Road
Hong Kong

Yuming Fu (Contact Author)

National University of Singapore ( email )

Department of Real Estate, NUS Business School
15 Kent Ridge Drive
S119245
Singapore

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