In this paper we revisit many studies that have attempted to explain the determinants of real estate capitalization rates. We introduce two new innovations. First we are able to identify two macroeconomic factors that greatly impact cap rates besides risk free treasury rates. These are the general corporate risk premium operating in the economy, and the amount of debt (liquidity) available. The addition of these factors greatly adds to the ability of previous models to explain the secular fall of cap rates in the last decade and the recent rise. In addition, we use innovative tests for "structural" shifts in the cap rate-even including all of these macroeconomic factors. Our tests identify two distinct "periods" which we label "investor sentiment". These were a period of negative sentiment in 1991-1996 and a period of positive sentiment from 2002-2007. Methodologically, our analysis uses a large and robust quarterly panel data set of 30 US metropolitan areas from 1980q1 through 2007q4. We compare models not only using traditional measures of within sample "fit", but also examine how the models behave in in-sample "back test" forecasts.
A continuously averaging system is described in which a multichannel analyzer is coupled to an x-ray diffractometer. The motion of the arm of the diffractometer is synchronized with the channel advance so that there is a 1 to 1 correspondence between 2θ increments and channels. With this system a weak x-ray diffraction signal may be scanned repeatedly and the signal built up against the random noise introduced by fluctuations in the generating and detecting system with periods long compared to the channel dwell time. Other convenient uses of the analyzer in handling the x-ray diffraction data are briefly mentioned.
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