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
Date Written: February 2001
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: Suggested Citation