Finance Ph.D. Candidate
University of British Columbia
Email: gen.li@sauder.ubc.ca
Welcome! I am a 5th-year Finance PhD candidate at The University of British Columbia (UBC) Sauder School of Business. Before joining UBC, I worked as a pre-doctoral research associate at Yale School of Management.
Research Interests: Real Estate Finance, Asset Pricing, Household Finance
1. Spatial Extrapolation in the Housing Market, March 2024
Selected Conferences: NFA regular session (2024), USC PhD conference (2024), AREUEA National Conference (2024), AFA PhD Poster (2024), Finance Down Under Conference (2024), Eastern FA (2024), SWFA (2024), 22nd Macro Finance Society Workshop, NFA PhD session (2023)
Awards: Best Doctoral Student Paper in SWFA (2024)
Abstract: This paper introduces “spatial extrapolation,” a concept that refers to how economic expectations for one region are formed by extrapolating from the economic outcomes of another geographic area. We demonstrate this unique form of extrapolation by analyzing the purchasing behavior of out-of-town (OOT) homebuyers. Using data from approximately 3 million OOT housing transactions in the U.S. between 2002 and 2017, we find that a 50% increase in five-year hometown house prices leads OOT buyers to pay 2% more for OOT properties. The higher the hometown house price growth, the lower the realized returns and purchase discounts obtained by OOT buyers. To rule out the wealth effect, the paper designs two strategies. First, we classify renters, migrants, and second-home (SH) buyers to control the wealth increase from hometown properties. Second, we estimate geographic heterogeneity in extrapolative beliefs. We find that OOT buyers from higher extrapolation hometowns increase their purchase prices more after the hometown house price growth. Overall, our research highlights the potential spillover effects of extrapolation into other asset markets and provides evidence that extrapolative expectations have broader effects than previously recognized.
2. The Great Resignation was Caused by the Covid-19 Housing Boom, with Jack Favilukis, February 2023
Selected Conferences: CICF (2023)
Cited by 2023 Economic Report of the President
Abstract: Following the Covid-19 pandemic, U.S. labor force participation declined significantly in 2020, slowly recovering in 2021 and 2022 -- this has been referred to as the Great Resignation. The decline has been concentrated among older Americans. By 2022, the labor force participation of workers in their prime returned to its 2019 level, while older workers' participation has continued to fall, responsible for almost the entire decline in the overall labor force participation rate. At the same time, the U.S. experienced large booms in both the equity and housing markets. We show that the Great Resignation among older workers can be fully explained by increases in housing wealth. MSAs with stronger house price growth tend to have lower participation rates, but only for home owners around retirement age -- a 65 year old home owner's unconditional participation rate of 44.8% falls to 43.9% if he experiences a 10% excess house price growth. A counterfactual shows that if housing returns in 2021 would have been equal to 2019 returns, there would have been no decline in the labor force participation of older Americans. To better understand these empirical findings, we build a life cycle model with realistic heterogeneity in wealth, income, and ownership status. We show that in response to a positive shock to house prices, owners reduce hours while renters increase hours, as in our empirical results.
