Asset Pricing.

• Position: Program and Working Group Meeting - National Bureau of Economic Research

The NBER's Program on Asset Pricing met at The Wharton School, University of Pennsylvania, on November 20. NBER researchers Leonid Kogan, Sloan School of Management at MIT, and Amir Yaron, The Wharton School, organized the meeting. These papers were discussed:

Stijn Van Nieuwerburgh, New York University and NBER, and Pierre-Olivier Weill, University of California, Los Angeles, "Why Has House Price Dispersion Gone Up?"

Discussant: Markus K. Brunnermeier, Princeton University and NBER

Robert Novy-Marx, University of Chicago, "Investment Cash Flow Sensitivity and the Value Premium"

Discussant: Joao Gomes, University of Pennsylvania

Arvind Krishnamurthy and Annette Vissing-Jorgensen, Northwestern University and NBER, "The Demand for Treasury Debt"

Discussant: Monika Piazzesi, University of Chicago and NBER

Martijn Cremers and Antti Petajisto, Yale University, "How Active is Your Fund Manager? A New Measure That Predicts Performance"

Discussant: Jonathan Berk, University of California, Berkeley and NBER

Long Chen, Michigan State University, and Xinlei Zhao, Kent State University, "Return Decomposition"

Discussant: John Heaton, University of Chicago and NBER

Lubos Pastor, University of Chicago and NBER, and Robert Stambaugh, University of Pennsylvania and NBER, "Predictive Systems: Living with Imperfect Predictors"

Discussant: Jonathan Lewellen, Dartmouth College and NBER

Nieuwerburgh and Weill investigate the 30-year increase in the level and dispersion of house prices across U.S. metropolitan areas, using a calibrated dynamic general equilibrium island model. The model is based on two main assumptions: households flow in and out of metropolitan areas in response to local wage shocks, and the housing supply cannot adjust instantly because of regulatory constraints. Feeding into the model the 30-year increase in cross-sectional wage dispersion that is documented based on metropolitan-level data, the authors generate the observed increase in house price level and dispersion. In equilibrium, workers flow towards exceptionally productive metropolitan areas and drive house prices up. The calibration also reveals that, while a baseline level of regulation is important, a tightening of regulation by itself cannot account for the increase in house price level and dispersion: in equilibrium, workers flow out of tightly regulated towards less regulated metropolitan areas, undoing most of the price impact of additional local supply regulations. Finally...