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Spatial Dependence in Subprime Mortgage Defaults

Author

Listed:
  • Andréas Heinen

    (Université de Cergy-Pontoise)

  • James B. Kau

    (University of Georgia)

  • Donald C. Keenan

    (Université de Cergy-Pontoise)

  • Mi Lim Kim

    (Université de Cergy-Pontoise)

Abstract

We analyze the spatial default dependence between pairs of nonconforming securitized mortgages, originated in Los Angeles between 2000 and 2011 and clustered by zip code. Our approach allows us to estimate the range and shape of the spatial dependence function, which relates zip-code center-to-center distance between mortgages to the dependence parameter of a number of different copulas. We find significant evidence for the presence of spatial dependence, which decays to zero within 40km and can be well characterized by a squared exponential function, a special case of the Matérn spatial correlation function.

Suggested Citation

  • Andréas Heinen & James B. Kau & Donald C. Keenan & Mi Lim Kim, 2021. "Spatial Dependence in Subprime Mortgage Defaults," The Journal of Real Estate Finance and Economics, Springer, vol. 62(1), pages 1-24, January.
    • Handle: RePEc:kap:jrefec:v:62:y:2021:i:1:d:10.1007_s11146-019-09708-w
    DOI: 10.1007/s11146-019-09708-w
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    References listed on IDEAS

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    1. Arunav Das, 2021. "Visual Analytics approach for finding spatiotemporal patterns from COVID19," Papers 2101.06476, arXiv.org.

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