Richard Evans Published in International Real Estate Review
For release: February 26, 2015
Richard Evans, professor of Finance, is set to have his paper entitled “Five Property
Types’ Real Estate Cycles as Markov Chains” published in International Real Estate Review. This is the second of three papers to be published with co-author Glenn Mueller,
an eminent real estate cycle analyst.
The study expanded on previous findings by modeling five general types of commercial
real estate as unique Markov chains. The Markov chain analysis is a statistical model
that is more than 100 years old and now highly developed. It has never been applied
to real estate cycle analysis until now. Both papers published focused on the ability
to generate forecasts for the sixteen “cycle points” first defined by Mueller twenty
years ago. The forecasts are not what will happen and are not why “hyper-supply” or
“recession” will happen, but what cannot happen at a given date in the future (indicated
by a predicted zero probability) and what may happen (with probabilities that indicate
relative likelihood).
The third paper will be presented in April at the American Real Estate Society meeting.
This paper focused on industrial real estate cycles, reporting the solution to a problem
that had made it difficult to use the Markov model to predict the time that it would
take to cycle between any two cycle points, such as “trough of recession” to “first
expansionary point allowing feasible new construction.” Memphis has one of the world’s
premier industrial real estate markets, ranking in the top ten across the US making
it a good place to conduct research in the real estate field.