The Dividend Pricing Model: New Evidence from the Korean Housing Market

Posted: 5 Nov 2005

See all articles by Min Hwang

Min Hwang

George Washington University - Department of Finance

John M. Quigley

University of California, Berkeley, College of Letters & Science, Department of Economics (Deceased); University of California, Berkeley, Haas School of Business, Real Estate Group (Deceased)

Jae-young Son

Konkuk University

Abstract

It is generally conceded that dividend pricing models are poor predictors of asset prices. This finding is sometimes attributed to excess volatility or to a dividend process manipulated by firm managers. In this paper, we present rather powerful panel tests of the dividend pricing relation using a unique data set in which dividends are set by market forces independent of managers' preferences. We rely on observations on the market for condominium dwellings in Korea - perhaps the only market in which information on dividends and prices is publicly and continuously available to consumers and investors. We extend the dividend-price ratio model to panels of housing returns and rents differentiated by type and location. We find broad support for the dividend pricing model during periods both before and after the Asian Financial Crisis of 1997-1998, suggesting that the market for housing assets in Korea has been remarkably efficient.

Keywords: Housing price, rent, present value, asset prices

Suggested Citation

Hwang, Min and Quigley, John M. and Son, Jae-young, The Dividend Pricing Model: New Evidence from the Korean Housing Market. Journal of Real Estate Finance and Economics, Vol. 32, No. 3, 2006. Available at SSRN: https://ssrn.com/abstract=833165

Min Hwang (Contact Author)

George Washington University - Department of Finance ( email )

2023 G Street
Washington, DC 20052
United States

John M. Quigley

University of California, Berkeley, College of Letters & Science, Department of Economics (Deceased) ( email )

Berkeley, CA 94720-3880
United States
510-643-7411 (Phone)
510-643-7357 (Fax)

University of California, Berkeley, Haas School of Business, Real Estate Group (Deceased) ( email )

Berkeley, CA 94720-1900
United States

Jae-young Son

Konkuk University ( email )

Seoul 143-701, Korea
120 Neungdong-ro, Gwangjin-gu
Seoul 143-701, 143-701
Korea

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