Disaster risk and resiliency in Latin America

Fernandez, Santiago

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https://hdl.handle.net/2142/49831 Copy

Description

Title

Disaster risk and resiliency in Latin America

Author(s)

Fernandez, Santiago

Issue Date

2014-05-30T17:20:00Z

Director of Research (if dissertation) or Advisor (if thesis)

Almeida, Heitor

Doctoral Committee Chair(s)

Almeida, Heitor

Committee Member(s)

• Baer, Werner W.
• Hewings, Geoffrey J.D.
• Bebczuk, Ricardo

Department of Study

Economics

Discipline

Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Disaster Risk
• Resiliency
• Asset-pricing
• 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.

Graduation Semester

2014-05

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http://hdl.handle.net/2142/49831

Copyright and License Information

Copyright 2014 Santiago Fernandez

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