Power Laws in Real Estate Prices? Some Evidence

29 Pages Posted: 8 May 2016

See all articles by Calvin Blackwell

Calvin Blackwell

College of Charleston - School of Business

Date Written: May 6, 2016

Abstract

Power law distributions have previously been observed in data like city-size distributions (Zipf’s Law), income distributions, and financial asset prices. In this paper we explore the distribution of real estate prices in Charleston County, South Carolina. We fit both a power law, lognormal and exponential distributions to the data and compare the goodness of fit among the distributions. We find that the best fit distribution lies somewhere between the lognormal and power law distributions. We estimate how the power law exponent changes over time and find a potential relationship between the shape of the power law distribution and the bursting of the real estate bubble in 2007.

Keywords: Real Estate, Power law, Pareto distribution, Complexity

JEL Classification: R10, R31

Suggested Citation

Blackwell, Calvin, Power Laws in Real Estate Prices? Some Evidence (May 6, 2016). Available at SSRN: https://ssrn.com/abstract=2776852 or http://dx.doi.org/10.2139/ssrn.2776852

Calvin Blackwell (Contact Author)

College of Charleston - School of Business ( email )

Department of Economics
66 George Street
Charleston, SC 29424
United States
843-953-7836 (Phone)
843-953-5697 (Fax)

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