mini传媒

Published on October 2, 2024
Job titles and other details are as of the time of publication.
(The interview was conducted in Japanese and was thereafter translated into English.)

Incorporating spatial econometrics techniques to improve the explanatory power of empirical models

My research is focused on the areas of empirical asset pricing, real estate finance, and urban economics. Let me explain through one of my ongoing research projects, entitled “Crime Measures and Housing Prices: an Analysis Using Quantile Regression and Spatial Autocorrelation.”

In this paper, my coauthor and I analyze transaction data for single-family home sales made in Seattle, Washington, between 2008 and 2020, and we study the effect of crime rates on housing prices in the Seattle metropolitan area. We mainly use the number of 911 calls as a variable proxying for crime rates. In addition, we incorporate a spatial autocorrelation analysis to account for factors that may not be visible in the data but certainly exist there as “invisible neighborhood characteristics” into empirical models, such as local amenities, air pollution, and noise issues. The spatial autocorrelation analysis here is used as a method to estimate the extent to which the transaction price of, e.g., real estate property A is influenced by the abovementioned invisible characteristics (those that are difficult to observe, or “visualize” from data), which are likely shared with its neighboring houses, properties B, C, D, etc. (e.g., the aforementioned local security and air pollution), in addition to the property’s physical, hence “visible” characteristics (e.g., lot size, number of rooms, and year of construction).

So far, we have found some interesting results. A model without adjustments for spatial autocorrelation shows that, consistent with the prior studies, higher crime rates (proxied by the number of 911 calls) cause housing prices to fall. But when spatial autocorrelation is taken into account, we find that higher crime rates cause housing prices to rise. We attribute such results to what is referred to in the prior study as “collective efficacy.” Whether it is in the United States or Japan, certain areas tend to attract certain people with similar inclinations and economic situations. Put simply, these people foster neighborhood relationships and gradually build local communities. Our results suggest that such invisible and neighborhood specific characteristics, or collective efficacy, can be explained by our empirical models that incorporate spatial autocorrelation adjustments. We often hear that criminals tend to target high-income areas because of potentially more lucrative gains by stealing valuable items. In areas with higher collective efficacy, I predict that residents there would immediately call 911 if they see a suspicious stranger walking around the neighborhood. I believe that this atmosphere, or “collective efficacy,” leads housing prices to actually increase in the area, even if burglaries or other crimes occur.

We are in the process of furthering our research to support the above explanation. I believe our research has the potential to contribute to urban planning and housing policies in Japan as well as in the United States.

How I got into English – from talking with foreign teachers to watching basketball games

Some of you may be wondering why my research is based on Washington State data.

If you see me now, I may speak English at a level closer to my native language of Japanese, with prior teaching experience at universities in the US for a number of years, but originally, I grew up in a basically non-international environment. I was born in Nakatsugawa City, Gifu Prefecture, surrounded by rural landscapes. From elementary school through high school, I attended local public schools.

My first encounter with English dates back to when I was in the sixth grade of elementary school. At my mother’s suggestion, I started to take English lessons to prepare for English classes that would begin in junior high school. I had barely learned the alphabet at that stage. My first actual taste of international interaction came later, communicating with assistant language teachers (or ALTs – native English speakers who work with and assist English teachers during class in Japan) at my junior high school. That interaction sparked my interest in English.

Moreover, I played basketball in junior high and high school, so I often stayed up late watching American professional league games on satellite TV. Occasionally, you’d hear players and coaches speaking loud in English on and off the court, and I remember thinking, “They are so cool!” Keen to have a good command of English like them, I put a lot of effort into my English classes, which later led me to study English and International Studies as my undergraduate major in college. During my undergraduate years, I had a chance to study abroad in the United States (Washington State) as an exchange student for one year.

Seeing students struggle in the United States made me realize the importance of finance

After some time actually living in the United States, I found that the reality was quite different from the impression of the country I had before. I had always thought that everyone in the United States was economically well-off, living fulfilled lives. But the year when I first lived there was 2009, just after the bankruptcy of Lehman Brothers, and I saw that some students were even struggling to afford daily food, buying cheap ramen (less than 100 yen a bag) at the supermarket for all three meals. There were also students whose parents had been fired in the aftermath of the financial crisis. Many students worked part-time jobs immediately after class (some students came to college classes while working full-time). Once they graduated, they would live their lives swamped with work to pay off their student loans. That was the reality of the United States at the time.

To understand why the United States had come to this point, I decided to start studying economics and business administration, and took some relevant classes. As I learned more about the Lehman Shock, the subprime mortgages, and then the real estate bubble, the keyword “finance” came up frequently. That motivated me to delve into this field.

From the University of London to Washington State University

A short, one-year exchange program was not enough to further my studies. So, after returning to Japan and as soon as I graduated from university, I spent two years in a master’s course studying business administration, and in particular, finance.

Upon completion of graduate study, I still wanted to learn more about finance, leading me to start looking for a doctoral program to apply, to earn a Ph.D., and eventually become a researcher in the future. With my supervisor’s suggestion, I joined a Master of Research course (which is practically a researcher training program designed to help bridge the gap between master’s and doctoral programs) at the University of London (UK).

Meanwhile, I always wanted to return to the State of Washington, where I had been inspired to study finance. During my time at the University of London, I applied to the doctoral program at Washington State University, and luckily enough received an offer from them.

The topic I wanted to focus on the most during my five-year doctoral program was the period around the Lehman Shock. I wrote my doctoral dissertation on the impact that the restrictions on short selling, announced by the Securities and Exchange Commission (SEC) in the midst of the 2008-2009 financial crisis, had on the stock market, options market, and single stock futures market. This paper was later published in an internationally peer-reviewed academic journal.

In addition to my doctoral dissertation topic, I was also interested in real estate finance. After obtaining my Ph.D., I then focused on the real estate bubble that caused the Lehman Shock, and expanded my research to include real estate finance. I am currently conducting a quantitative and multifaceted analysis of the impact that negative perceptions held by home buyers – for example, higher crime rates in a residential area – may have on housing prices in the same area, the impact that homeless encampments may have on nearby housing prices, and more.

Research is a way for me to give back to Washington State, my home away from home

I believe that my research, along with previous research conducted around the world, will ultimately contribute to urban planning and housing policies. Although I do not have the exact numbers, most people around the world spend a large proportion of their income on their mortgages or rent. Thus, I believe this research will prove to be beneficial not only to people in the United States but also in Japan and all over the world.

Then again, what drives me in my research is the desire to give back to Washington State. Washington has given me many things: the English skills I acquired during my one-year exchange program, a glimpse into peoples’ lives when the country suffered the financial crisis, motivation to study finance, fellow students and friends from my doctoral program with whom I shared good times and bad, and mentors with whom I now collaborate as co-researchers.

Apart from my hometown in Japan, where I was born and raised, Washington State is the place where I have spent the longest time of my life, making it my second hometown. I hope to continue my research and contribute even more to the place that nurtured me and shaped me into the researcher I am today.

I hope my experience can help both Japanese and international students

After such experiences abroad, I returned to Japan permanently with the goal of giving back to the Japanese education system. After completing my Ph.D., I taught finance at the University of Minnesota, Duluth for five years. Each class typically had 40 to 60 students, the majority of whom were from Minnesota and its neighboring states. In many semesters, I was the only non-native English speaker in the room. Teaching in such an environment for five years was a valuable experience. Although my English skills improved over the years I spent abroad, this progress would not have been possible without the foundational skills I acquired through the Japanese education system. For this, I am deeply grateful for the English education I received in Japan, and I want to do everything I can to give back to the system.

For Japanese students, I would like to share my experiences and encourage them to take their first steps abroad. For international students at Hitotsubashi University who aspire to work and settle in Japan after graduation, I would like to share how I, as once an international student, navigated studying abroad, faced competition, and ultimately secured a university faculty position. I hope to support them along their academic journey in Japan and provide them with a sense of belonging, even if they may be far away from their home country. In this way, I wish to share my experiences with both Japanese and international students, as I believe that this is the role I should fulfill moving forward.