Uncertainty, Competition and Timing of Land Development: Theory and Empirical Evidence from Hangzhou, China

Uncertainty, Competition and Timing of Land Development: Theory and Empirical Evidence from... Considering the existence of strong policy intervention in China, this paper introduces policy uncertainty into standard Real Options framework, and provides a theoretical explanation for the land development decision in an emerging market. Based on survival analysis, we examine the determinants of timing of land development empirically, using a sample of 783 residential projects in Hangzhou, China from 2005 to 2011. We use monetary policy indices as measurement of policy environment, and results verify our theoretical prediction that when the expected policy is positive, an increase in policy uncertainty significantly lowers the likelihood of land development; otherwise, policy uncertainty accelerates land development. However, market uncertainty fails to meet the prediction of standard Real Options, which indicates that developers in China focus more on policy uncertainty rather than market uncertainty in exercising their real options. We further find that in the face of declining demand, price volatility significantly accelerates land development, which verifies Grenadier, The Journal of Finance, 51(5), 1653–1679, (1996)’s prediction of “Recession-induced Construction Booms”. Empirical finding also verify that competition alone exerts a negative effect on development timing and also has a positive crossing effect with policy uncertainty. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Uncertainty, Competition and Timing of Land Development: Theory and Empirical Evidence from Hangzhou, China

Loading next page...
Springer US
Copyright © 2015 by Springer Science+Business Media New York
Economics; Regional/Spatial Science; Financial Services
Publisher site
See Article on Publisher Site


You’re reading a free preview. Subscribe to read the entire article.

DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

Monthly Plan

  • Read unlimited articles
  • Personalized recommendations
  • No expiration
  • Print 20 pages per month
  • 20% off on PDF purchases
  • Organize your research
  • Get updates on your journals and topic searches


Start Free Trial

14-day Free Trial

Best Deal — 39% off

Annual Plan

  • All the features of the Professional Plan, but for 39% off!
  • Billed annually
  • No expiration
  • For the normal price of 10 articles elsewhere, you get one full year of unlimited access to articles.



billed annually
Start Free Trial

14-day Free Trial