Loss Recoveries, Realized Excess Returns, and Credit Rationing in the Commercial Mortgage Market

Posted: 11 Jan 2007

See all articles by Brian A. Ciochetti

Brian A. Ciochetti

Independent

James D. Shilling

DePaul University; National Bureau of Economic Research (NBER)

Abstract

In this paper we exploit loan level data combining foreclosure histories with information about the revenues and expenses associated with the ongoing management and eventual sale of financially distressed loans to estimate the magnitude of realized excess returns on commercial mortgages. Our findings are striking. We find that average realized excess returns on commercial mortgages are the lowest at the best times a la Stiglitz and Weiss [1981]. We also find that excess realized returns on commercial mortgages are low when lenders are swamped with funds (which we measure by the volume of commercial mortgage commitments) and when promised spreads are low.

Keywords: asset pricing, information and market efficiency, mortgages

JEL Classification: G12, G14, G21

Suggested Citation

Ciochetti, Brian A. and Shilling, James D., Loss Recoveries, Realized Excess Returns, and Credit Rationing in the Commercial Mortgage Market. Journal of Real Estate Finance and Economics, Vol. 34, No. 4, 2007, Available at SSRN: https://ssrn.com/abstract=956100

James D. Shilling

DePaul University ( email )

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Chicago, IL 60604
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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