Working papers

Home is where the health is: housing and adult height, 1870-1965

Poor sanitation and overcrowding have severe impact on the disease environment. This study analyzes the impact of housing quality on physical health, proxied by adult height, during the late 19th and the first half of the 20th centuries. Using panel data on 14 advanced economies, the empirical results suggest that improved housing quality—proxied by rising housing prices—significantly contributed to human stature by reducing overcrowding and creating better hygienic standards. To be precise, a one-standard-deviation increase in real house prices translated to 1–1.2 cm taller adult heights—an amount which at that time was associated with 1.2 to 2.1 years of additional life expectancy on average. Also, 15 percent of the average height increase of 10 cm across all countries can be attributed to housing quality. These findings are robust even when we control for income.

Presented at:

  • Conference of the European Real Estate Society (ERES) in Reading, UK, June 2018
  • Annual Conference of the Economic History Society (EHS) in Keele, England, April 2018 (view press release here)
  • Conference of the American Real Estate and Urban Economics Association (AREUEA) at the Annual Meeting of the Allied Social Sciences Association (ASSA) in Philadelphia, USA, January 2018 (poster)

Risk attitude and capital market participation: is there a gender investment gap in Germany? (with J.-C. Fey, O. Lerbs and M. Weber)

Do women invest differently from men? We try to contribute to the answer of this question by analyzing the Panel on Household Finance (PHF) of the German Bundesbank. This representative panel collects a wide variety of behavioral and financial variables in the area of household finance. Using the 2014 wave, we find that participation in risky assets is generally lower among women than among men. Once risk attitude is controlled for, this effect significantly diminishes. It disappears when single women are compared to single men---conditional on other demographical variables. Given participation in the market, we only find a weak effect for gender in the whole sample, which again disappears for the group of singles. Within their risky assets, men invest more into certificates whereas women invest more into funds.

Presented at:

  • 3rd Household Finance Workshop in Heimbuchenthal, Germany, October 2018

Homeownership: Boon and Bane

Using system GMM and IV regression, I investigate whether homeownership makes an economy stronger or weaker for a panel of 21 industrialized countries. The results confirm that low to intermediate levels of homeownership have a positive association with GDP growth, but that there is a turning point at homeownership rates of around two-thirds due to housing overinvestment. While a slight deviation from that point has little effect on GDP, which is the case for the U.S., German-speaking and southern European countries could gain by adjusting their homeownership rates.

Presented at:

  • International Conference of the American Real Estate and Urban Economics Association (AREUEA) in Amsterdam, Netherlands, July 2017
  • 6th Ioannina Meeting on Applied Economics and Finance in Corfu, Greece, June 2016
  • 2nd International Conference on Applied Macro, Theory and Empirical Finance in Thessaloniki, Greece, May 2016

House Prices in the Presence of an Up-front Capital Subsidy for Low-income Home Buyers

The German secretary of housing and urban development recently proposed an up-front capital subsidy to help financially weaker families purchase a home in more expensive regions in Germany. This paper analyzes whether this subsidy is an appropriate policy instrument to achieve the desired goals by presenting an equilibrium model of prices of high- and low-priced houses. The question that this paper tries to answer is: Do subsidies for low-income home buyers make owning more affordable or could they also distort house prices? The model reveals that this subsidy will not only make owning for low-income households less affordable---it will also increase the prices of expensive houses that are not within reach of low-income households.

Stock Markets in Argentina: An Empirical Analysis of Market Efficiency, 1880-1913

This article investigates the price and return behaviour in the Argentine stock market from 1880 to 1913. The aim is to discover if returns of the listed firms’ stocks were predictable or not. This is put into practice by use of the augmented Dickey-Fuller test and the runs test developed by Wald and Wolfowitz. Both analyses will show that investors in the Argentine equity market were not able to make systematic excess returns by using past information for their prediction of prices.

Work in progress

Predicting price coarseness (with T. Lindenthal)

Women and real estate investment in Germany

House prices in Scotland, 1800-1940

Teaching cases in economics and finance

Schmidt, C. (2016). A Journey Through Time: From the Present Value to the Future Value and Back Or: Retirement Planning: A Comprehensible Application of the Time Value of Money Concept. American Journal of Business Education 9(3), 137-143.

Real-life applications of financial concepts are a valuable method to get students engaged in financial topics. While especially non-finance majors often struggle to understand the importance of financial topics for their personal lives, applying these theories to real-life examples can significantly improve their learning experience and increase their understanding. This teaching case demonstrates how the time value of money concept can be applied to one’s private retirement planning. Because of its simple assumptions, the case is targeted at an audience with little financial knowledge and can be used in finance as well as in accounting classes.

Schmidt, C. (2016). Burgernomics: An Instructional Case on the Law of One Price. Journal of Business Case Studies 12(2), 77-82.

Jane just moved back to her hometown in Western New York to start a job at a bank. One evening, she meets her old friend Sally, who traveled the world for the past 5 months and tells Jane about her experiences with the different price levels in all the countries that she visited. Jane, being a recent graduate in international economics and finance, understands the underlying dynamics that are due to exchange rate theory and sheds light on the price discrepancies prevailing between the different currencies.

This case focuses on the construction of the Big Mac index and on conveying the theoretical basis of the index (Purchasing Power Parity and the Law of One Price) to undergraduate students in business and economics. It is appropriate for use in undergraduate courses such as international finance, financial markets or international economics. It could also be used in (international) marketing courses to show the importance of product pricing.

Schmidt, C. and T. Azarmi (2015). The Impact of CoCo Bonds on Bank Value and Perceived Default Risk: Insights and Evidence from Their Pioneering Use in Europe. Journal of Applied Business Research 31(6), 2297-2306.

Contingent convertible (CoCo) bonds convert to equity during financial distress. They help transfer the responsibility for bearing the costs of poor performance from the taxpayers to the bank owners. Our results are thus relevant for investors, financial decision-makers, and regulators. We analyze the effects of the pioneering use of CoCos in Europe by Lloyds Banking Group in 2009. The bank’s motivation for the issue is explored, considering both its economic situation and the Basel III regulations. We document a reduction in the bank’s market value  following the announcement of the intention to issue CoCos. Simultaneously, the credit default swap spread goes up. This study suggests that CoCos can have a negative effect on a bank’s creditworthiness and firm value.

Presented at:

  • 22nd Annual Global Finance Conference in Hangzhou, China, April 2015
  • International Business Conference in London, UK, June 2015

Moersch, M. and C. Schmidt (2015). Of Haircuts and Extensions: An Analysis of Greek Government Debt. International Research Journal of Applied Finance VI(8), 1-11.

In light of the current negotiations concerning the Greek debt, this paper conducts a valuation analysis based on the Present Value (PV) method. We explain the rationale for the PV method and use it to model a simplified representation of the Greek debt situation. We illustrate the effects of changes in the variables in the PV function and show that if the Greek loan interest rate was decreased by 50 basis points and the maturity of the debt was extended from 30 to 50 years, the effect would be equivalent to a haircut of roughly 59%. 


American Real Estate and Urban Economics Association

Urban Economics Association

American Economic Association 

Economic History Society

Regional Studies Association