| This dissertation consists of three essays which study various aspects of real estate investments, both residential and commercial real estate.;The first essay, "An Intertemporal Capital Asset Pricing Model with Owner-Occupied Housing", incorporates owner-occupied housing into an otherwise standard asset pricing model. This essay derives the portfolio and consumption choices of households, and then studies the equilibrium effects on financial asset pricing. An analytical two factor pricing model is derived, in which the market portfolio return and the housing return are two pricing factors, and two important ratios, namely the non-durable consumption to wealth ratio and the non-durable consumption to housing ratio, serve as conditional factors, which also enter the stochastic discount factor linearly.;The second essay, "Borrowing Constraints, Price and Rent Dynamics in the Housing Market", explains two puzzling facts in the housing market. The first one that house price increases much faster then house rent and the second one is that house price is much more volatile than house rent. This paper argues that the borrowing constraints in the housing market make the income elasticity of demand for owner-occupied housing much larger then the income elasticity of demand for rental housing. The above idea is formalized using a dynamic general equilibrium model. The results show that the model quantitatively matches the two stylize facts in the data.;The third essay, "Percentage Lease as a Barrier to Entry", argues that the widely used percentage lease in retail contracts can be used to deter entry. Percentage lease contract gives incentive to the landlord to delay leasing extra space to a direct competitor, because competition between tenants will reduce sales of the existing tenant, thus reduces the percentage lease received by the landlord. A real options model is used to study the entry deterrence effect of the percentage lease. In the optimal contract, the model shows that the percentage lease is positive and percentage lease is decreasing in other factors that can deter entry, for example, entry cost, volatility of the shock. |
