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SOE: Fachverband Physik sozio-ökonomischer Systeme
SOE 18: Financial Markets and Risk Management I
SOE 18.7: Talk
Thursday, March 17, 2011, 12:00–12:15, GÖR 226
(contribution withdrawn) The origin of Pareto law in house price distribution — •Takaaki Ohnishi1,2, Takayuki Mizuno3,1, Chihiro Shimizu4, and Tsutomu Watanabe3,1 — 1The Canon Institute for Global Studies, Tokyo, Japan — 2Graduate School of Economics, The University of Tokyo, Tokyo, Japan — 3Institute of Economic Research, Hitotsubashi University, Tokyo, Japan — 4Faculty of Economics, Reitaku University, Chiba, Japan
We empirically investigate the house price distributions in the Greater Tokyo Area by using a unique dataset containing individual listings of 724,416 condominiums from 1986 to 2009 [1]. The house price follows a Pareto (power-law) distribution. On the other hand, the house size follows an exponential distribution, which is explained by maximizing the entropy (the number of variety of house sizes) subject to the constraint of a fixed total size of all houses.
We find a positive linear relationship between the log price and the size. This is justified by the fact that size-adjusted prices follow a lognormal distribution except for the housing bubble periods. By considering the location of a house as an additional attribute, the distribution of size-adjusted price is close to a lognormal distribution even in bubble periods.
Pareto law in house price distribution can be considered to be generated by the exponential distribution of house size and the linear relationship between the log price and the size.
[1] T. Ohnishi, T. Mizuno, C. Shimizu and T. Watanabe, "On the Evolution of the House Price Distribution", preprint (2010).