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Title:Disaster risk and resiliency in Latin America
Author(s):Fernandez, Santiago
Director of Research:Almeida, Heitor
Doctoral Committee Chair(s):Almeida, Heitor
Doctoral Committee Member(s):Baer, Werner W.; Hewings, Geoffrey J.D.; Bebczuk, Ricardo
Department / Program:Economics
Degree Granting Institution:University of Illinois at Urbana-Champaign
Subject(s):Disaster Risk
Real estate
Latin America
Abstract:This dissertation analyzes the implications of economic crises on real estate markets in Latin America using a new database on real estate prices from seven countries in the region. In the first chapter it is found that after a crisis begins, the Price Earnings Ratio (PER) of real estate increases significantly relative to stocks and sovereign bonds. This result implies that during times of instability investors are willing to pay a price premium for holding real estate instead of stocks and sovereign bonds. The argument behind this empirical finding is that during these crises there is a capital flight towards real estate due to a higher resiliency perceived by investors on this asset class. The second chapter develops a theoretical asset-pricing model that uses the notion of resiliency to economic disasters to explain the empirical observation of a widening in the gap between the PER of resilient (real estate) and non-resilient (stocks, bonds) assets during crises. The model was calibrated using data on real estate, stocks and sovereign bonds from Argentina, Brazil and Uruguay. The calibrated model was able to match the risk premium of each asset class and predict correctly the heterogeneous evolution of the asset's PER after an increase in the probability of disaster.
Issue Date:2014-05-30
Rights Information:Copyright 2014 Santiago Fernandez
Date Available in IDEALS:2014-05-30
Date Deposited:2014-05

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