Real and Private-Value Assets*

William N. Goetzmann Christophe Spaenjers Stijn Van Nieuwerburgh

Yale School of Management HEC Paris Columbia Business School

This version: March 23, 2021

Abstract

Real and private-value assets—defined here as the sum of real estate, infrastructure, col-

lectibles, and noncorporate business equity—compose an investment class worth an estimated

$84 trillion in the U.S. alone. Furthermore, private values can affect pricing in many other

financial markets, such as that for sustainable investments. This paper introduces the research

on real assets and private values that can be found in this special issue. It also reviews recent

advances and highlights new research directions on a number of topics in the real assets space

that we believe to be particularly important and exciting. (JEL G11, G12, G41, R31, R33, Z11)

* This paper has been written for a special issue of the Review of Financial Studies on real and private-value assets.
Goetzmann and Spaenjers served as the organizers of a conference on the topic at the Yale School of Management in
January 2020, with Van Nieuwerburgh acting as the sponsoring RFS Editor. We thank the conference program committee
members for their feedback on the submissions, and Leigh Ann Clark and Electra Ferriello for logistical support. We
are also thankful to Dragana Cvijanović, Paul Goldsmith-Pinkham, Ralph Koijen, Matthijs Korevaar, Cameron LaPoint,
Candy Martinez, Tarun Ramadorai, Jacob Sagi, Eva Steiner, and Johannes Stroebel for comments on this paper, and Blair
Vorsatz for sharing data. Michael Leahy provided valuable research assistance. Any remaining errors are ours. Send
correspondence to Stijn Van Nieuwerburgh, svnieuwe@gsb.columbia.edu.
 Financial assets are contractual claims to benefits that flow from ownership or promises from

income-producing entities. By contrast, the owner of a real asset has the right to possess and

personally enjoy a particular piece of durable physical property that is typically unique (or at

least in limited supply and subject to heterogeneity in quality). Ownership also gives the right to

contract over the use of this property. The most well-known real asset type is of course real estate,

be it residential, commercial, or agricultural. Other important real asset categories are physical

infrastructure and collectibles.1

When can durable physical objects be considered assets? Commercial real estate and infrastruc-

ture projects yield cash flows, and acquirers’ intention is clearly to earn a return commensurate

with the risks they are taking. By contrast, one might treat a cabin in the woods or an oil painting

as simply a consumption good for which one pays a price and then enjoys a service flow. However,

when a residential structure or a collectible is purchased with an expectation of a (possible) future

resale—when there is an anticipated dimension of time with attendant concern for the object’s

financial risk and return—then it becomes an asset.

The price formation and trading process of real assets is unlike that for publicly traded equities.

Real assets are characterized by infrequent trading in search and auction markets, market values

that are difficult to pin down exactly, and investment returns that can only be estimated with noise.

Moreover, for assets such as owner-occupied housing and works of art, the use value derived from

ownership is nonmonetary and nontradable, and is private in the sense that it depends on the identity

of the owner. For private-value assets, any two potential buyers will be willing to pay different

amounts—reflecting differences in preferences and relative wealth—even when they have identical

resale strategies and agree on future monetary cash flows. Because of the illiquidity of the markets

in which these assets are traded, variation in private values can translate into systematic differences

in transaction prices and thus financial returns between market participants. Heterogeneity in
1 Commodities are a well-established asset category on their own, and fall outside of the scope of our analysis. Many
commodity markets are relatively liquid; trading often happens through financial contracts, such as futures; and the
notions of uniqueness and heterogeneity are not as relevant as for the assets discussed in this paper. We also do not
cover research on secondary markets for durable consumer goods (e.g., cars) or capital equipment (e.g., aircraft); see
Gavazza and Lizzeri (2021) for a recent review of the literature.

1
beliefs about the future dynamics of private preferences—driving potential resale revenues and

thus the common-value component of an asset—can further amplify the price uncertainty at any

point in time.

Real assets are not the only type of investments with private-value components. In particular,

the nonpecuniary private benefits from running one’s own business may be an important part of

the utility flow from entrepreneurship. Noncorporate businesses also share the aspect of illiquidity

with the real assets mentioned before.

We here thus define “real and private-value assets” (RPVA) as the sum of real estate, infras-

tructure, collectibles, and noncorporate business equity. Such assets not only are pervasive but

also represent a significant fraction of the economy. Both institutional and household portfolios

have substantial sums of money invested in RPVA. In Section 1 of this paper, we attempt a rough

quantification for the United States, which arrives at an aggregate asset class value of $84 trillion.

Private values also can be of importance for the pricing of more traditional financial assets.

We can think, for example, of distributions of idiosyncratic preferences around the ESG or impact

features of businesses and how these increasingly affect investment decisions and valuations.

The existing body of published research arguably does not measure up to the importance of

RPVA and of the role of private values in asset pricing more generally, even if much progress is

currently being made. The Review of Financial Studies therefore decided to sponsor a conference and

special issue on the topic. The idea was to simultaneously showcase the current work in the area

and to stimulate new research, as explained in more detail in Section 2.

The current article, authored by the sponsoring RFS Editor and the two organizers of the

conference, serves as the introduction to the special issue. In Section 3, we present the eleven

original research articles in this issue. We organize our discussion around three research themes:

the measurement of risk, return, and liquidity of real assets; drivers of variation in valuations and

investment behavior; and private values in other asset markets. In Section 4, we identify a number

of research topics that we believe to be particularly promising areas for future work.

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1 Size of the Real and Private-Value Asset Class

It is fiendishly difficult to arrive at a precise and internally consistent assessment of the total size

of the RPVA class. All methods agree, however, that the asset class is large and growing. Table

1 compiles our—admittedly rough—estimate of its size in the United States, based on the latest

available data. The bottom line is that RPVA is a $84 trillion asset class. The appendix lists the data

sources and the details of the calculations. Here is a summary of how we arrived at our headline

numbers:

Residential real estate. Residential real estate is relatively straightforward to value. According to

the Financial Accounts of the United States, it was worth $31.2 trillion in 2020.Q3.

Commercial real estate. The aggregate value of commercial real estate (CRE) assets, including

multifamily rental housing, is much more difficult to measure. We use Financial Accounts data on

real estate values held by the nonfinancial corporate, nonfinancial noncorporate, nonprofit, and

equity real estate investment trust (REIT) sectors. This delivers an aggregate U.S. CRE market value

of $32.8 trillion.

Table 1 also provides a breakdown into the various subsectors of CRE. We use private (i.e., non-

government-owned) fixed asset data from the Bureau of Economic Analysis (BEA) to decompose the

CRE value derived from the Financial Accounts into its subsectors. Industrial real estate includes

warehouses and manufacturing structures. Many manufacturing structures are owned by end users

and rarely trade. Health care includes hospitals, many of which may not trade much either, and

which are sometimes classified as social infrastructure instead.

Our estimate exceeds numbers provided by the CRE industry, which tend to be based on

“investable” assets. The third column of Table 1 reports one such estimate based on Koijen and

Van Nieuwerburgh (2021) for the four main CRE sectors, using data from Real Capital Analytics

(RCA). They construct price indexes based on all CRE transactions from 2001 until 2020 over $10

million, and then value the stock of all CRE assets that ever traded over this 20-year period as of

3
the end of 2019. The RCA assets add to $4.7 trillion, an estimate that excludes many assets that

never trade, such as office and manufacturing properties owned and used by the corporate sector.

Agricultural real estate. Agricultural real estate (land and structures) is worth an estimated $2.6

trillion in 2020, according to the U.S. Department of Agriculture. Farmland, like other commercial

property, is income producing. However, like for housing, some fraction of its value may have

private-value components associated with patrimony, intergenerational ownership, and status.

Infrastructure. The next category of real assets is infrastructure. The World Economic Forum

(2014) defines infrastructure as “the physical structures—roads, bridges, airports, electrical grids,

schools, hospitals—that are essential for a society to function and an economy to operate.” Many

infrastructure assets are owned by governments (around 75% according to a report by RARE

(2013)). We focus on privately held assets in the United States and use BEA data to arrive at an

estimated value of $6.9 trillion for 2019. Table 1 provides a breakdown into various subcategories.

Our measure of social infrastructure covers educational, vocational, and religious structures, but

excludes hospitals, which we classify as commercial real estate.

Collectibles. For collectibles, we rely on Vorsatz (2020), who estimates the total float of different

collectible types based on wealth distribution data and high net worth individuals’ reported

collectibles ownership. We get to an aggregate value of jewelry, fine art, and antique furniture

owned by U.S. households of $4.6 trillion.2 Table 1 reports the estimates for the different components.

Goetzmann and Whitaker (2021) use U.S. estate tax records from 2013 to arrive at a year 2020 value

for fine art between $1.5 and $2.0 trillion, which is similar to the $1.8 trillion estimate reported here.

Noncorporate business equity. Finally, we include private business wealth. According to the

Financial Accounts, household-owned equity in nonfinancial noncorporate businesses (such as

sole proprietorships and partnerships) is worth $12.7 trillion as of 2020.Q3. However, a substantial

portion of this estimate represents a claim to real estate assets that are already included in our
2 This is a conservative estimate as we exclude classic cars, coins, stamps, wine, and other types of collectibles.

4
 Table 1: Aggregate value of RPVA in the United States (in billions of US$)
Asset type Aggregate Subtype RCA data Period
Residential real estate 31,232 2020.Q3
Commercial real estate 32,793 2020.Q3
Multifamily 7,027 1,453
Office 6,305 1,519
Retail 7,015 916
Industrial 5,167 811
Hospitality 3,466
Health care 3,522
Student housing 291
Agricultural real estate 2,569 2020
Infrastructure 6,901 2019
Power 2,433
Electrical transmission equipment 564
Communication 702
Transportation 515
Water, sewage, and waste treatment 185
Petroleum and gas 1,350
Mining 148
Social infrastructure 1,004
Collectibles 4,638 2017
Precious jewelry 2,156
Fine art 1,798
Antique furniture 684
Noncorporate business equity (excl. CRE) 6,055 2020.Q3
Total 84,189

commercial real estate measure. To avoid double-counting, we subtract the $6.6 trillion in real estate

equity owned by the nonfinancial noncorporate business sector to arrive at a value of $6.1 trillion.3

Another way to emphasize the importance of RPVA is to compute their share in household

portfolios. If we consider real estate, consumer durable goods, and noncorporate business equity as

RPVA for this exercise, then the asset class is worth $50 trillion of household wealth in 2020.Q3, up

from $30 trillion in 2012. This represents 38% of overall household assets, a share that has remained

fairly constant over the past decade.4

3 To compute the sector’s real estate equity, we subtract its total loans from its real estate assets.
4 We include durables in this calculation as a proxy for collectibles. We include all $12.7 trillion of noncorporate
business equity since the double-counting issue does not arise here. Data come from the Financial Accounts of the
United States, table B.101.h for the household sector, for 2020.Q3. This share understates the fraction of RPVA in
household portfolios since some of their corporate equity, mutual fund, and pension fund holdings reflect real estate and
infrastructure investments.

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 Gomes, Haliassos, and Ramadorai (2021) review the available evidence on household balance

sheets around the world. They report that shares of real assets are even higher in developing

economies than in developed markets, a finding that points to an “asset tangibility preference”

potentially related to the use of real assets as collateral or as a way to ease intergenerational transfers.

Similarly, a survey of Barclays (2012) shows that financial motivations for holding art and other

collectibles are more important in emerging economies. More research on the drivers of RPVA

holdings in global household portfolios is warranted.

2 The Yale-RFS Conference and Special Issue

To stimulate new research and showcase important work in the area, the Review of Financial Studies

decided to sponsor a conference and special issue on the topic of “Real and Private-Value Assets.”

The conference was held on January 31, 2020, at the Yale School of Management, and cosponsored

by the International Center for Finance. The program committee was cochaired by the authors of

this article.

To allow authors sufficient time to develop new work, a first announcement for the conference

went out in January 2019. The final submission deadline was October 15, 2019. We received exactly

100 submissions. Of these, 73 papers were submitted under the dual submission rules of the RFS.

About 75 papers were sent out for review by a committee of 14 experts. Each paper received two

reviews. Based on the review scores and thematic fit with the conference, the program cochairs

chose eight papers for inclusion on the conference program.

Six of the eight papers at the conference were dually submitted to the RFS. In addition, the

sponsoring RFS Editor independently selected six more papers that were dually submitted to

proceed to formal submission to the RFS. All 12 of these papers went through the regular RFS

paper review process, independent from the conference evaluation. Paper acceptance decisions

were made solely by the RFS Editor, based on the recommendations of two referees. Six of the

papers in this issue originate from this dual submission process.

In addition, the RFS received several more papers that were not submitted to the conference but

6
were thematically a good fit for the special issue. Some of these manuscripts were already under

review prior to the conference. Five of the papers in this issue are such regular RFS submissions,

including a paper coauthored by one of the conference organizers (Chambers, Spaenjers, and Steiner

2021).

3 Research in This Special Issue

In this section, we briefly present the papers included in this special issue, highlighting their

contributions along three dimensions: the measurement of risk, return, and liquidity in real asset

markets; drivers of variation in valuations and investment behavior; and private values in other

asset markets.

3.1 Measurement of risk, return, and liquidity in real asset markets

Historically, the evaluation of the investment characteristics of real assets has typically taken place

through the construction of market-wide price and total return indexes. One challenge that the

literature on real estate faces is to control for time-series variation in the quality of the underlying

properties. Prior research has also struggled to estimate the average net income yields realized by

real estate investors, as data on actual cashflows are hard to obtain. Two papers in this issue, namely,

Eichholtz et al. (2021) and Chambers, Spaenjers, and Steiner (2021), aggregate from detailed asset-

level archival data on property prices and income to asset-class return estimates. Using different

empirical settings, both papers come to the conclusion that the return estimates for housing in Jordà

et al. (2019), which are based on aggregate market statistics, may be biased upward. Eichholtz et al.

(2021) find geometric average annual real total returns of 2.8% for Paris (1871–1943) and 4.8% for

Amsterdam (1900–1979), respectively 1.4% and 2.3% below the estimates of Jordà et al. (2019) for

the same locations and time periods. Using data from Oxford and Cambridge University college

portfolios over the period 1901–1983, Chambers, Spaenjers, and Steiner (2021) report an annualized

real total return for U.K. housing of 2.3%, a difference of 2.4% with Jordà et al. (2019).

Driven by a growing awareness that most household investors in real assets do not hold

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diversified portfolios, and that indexes are not investible (Chambers, Dimson, and Spaenjers 2020),

researchers are placing increasing attention on asset-level rather than on index-level risk measures.

Two papers in this issue discuss the idiosyncratic risk associated with real estate investments:

Giacoletti (2021) for housing and Sagi (2021) for commercial real estate. Both papers start from the

idea that the combination of an illiquid asset market and variation in subjective valuations must

lead to substantial transaction-specific risk. Hence, property values do not follow a random walk,

and the variance of property-level capital gains does not scale with the holding period. Sagi (2021)

builds a search model formalizing this idea and shows that it fits patterns in commercial real estate

transaction data well. Giacoletti (2021) documents evidence in favor of a causal effect of illiquidity

on transaction price dispersion. He also shows that idiosyncratic risk accounts for two thirds of

total property-level capital gain risk for 2-year holding periods, but only 45% for 15-year holds.

The mean Sharpe ratio on individual houses is just 0.44 for a 2-year holding period, although this

increases to 0.57 after 15 years. This compares to a Sharpe ratio estimate of 0.79 when ignoring

idiosyncratic risk. Disregarding asset-level capital gains risk thus leads to a biased view on real

estate’s risk-return trade-off.

Giacoletti (2021) and Sagi (2021) study real estate, but transaction-specific risk is likely to be

important in other real asset markets as well. For example, Lovo and Spaenjers (2018) construct an

auction model for artworks in which variation in bidder types is a source of idiosyncratic risk that

does not disappear even as the holding period converges to zero. The search model of Sagi (2021),

like the auction model of Lovo and Spaenjers (2018), implies that asset owners are more likely to

have a short holding period if an agent with a higher valuation comes along quickly. This highlights

the crucial role played by arbitrageurs in real asset markets. It also suggests a selection bias in

observed returns in real asset markets, where resale decisions and reserve prices are endogenous, at

least over short horizons. As such, these theoretical contributions relate to an econometric literature

that aims to correct repeat-sales estimators of art and housing returns for selection bias (Goetzmann

and Peng 2006; Korteweg, Kräussl, and Verwijmeren 2016; Korteweg and Sorensen 2016), and can

hopefully inform future work in this area.

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 Another, related insight following from these papers is that there is never a single, unambiguous

market value for an artwork or a house, but that one should think of a menu of possible combinations

of (expected) prices and speed of execution (“time on the market”). Recognizing the transactional

frictions in real asset markets should thus help in developing measures of liquidity (see, e.g., Kotova

and Zhang (2020)).

While Giacoletti (2021) and Sagi (2021) focus on idiosyncratic price dispersion, Eichholtz et al.

(2021) perform an asset-level decomposition of the variance of total real estate returns including

income yields. They find that, while in the short term, total return risk is mostly driven by

idiosyncratic capital gains, income yield risk becomes an increasingly important component of

property-level risk for longer investment horizons. Overall, a better understanding of time-series

and cross-sectional variation in the components of property-level returns and risk should also help

in studying and modeling, first, how income yields and capital gains correlate with each other and

with local housing market characteristics (e.g., Eisfeldt and Demers 2015), and, second, to what

extent different types of risk are priced (e.g., Han 2013; Peng and Thibodeau 2017; Eiling et al. 2020).

A related interesting question is whether returns compensate investors for bearing the risk that

is present in nearby cash flows or in cash flows that will materialize in the distant future. This is

the central focus of the paper by Giglio et al. (2021). Using data on freeholds and (very) long-term

leaseholds for the United Kingdom and Singapore, it deduces that the expected return for cash

flows more than 100 years in the future is only 2.6%. This long-run return estimate is substantially

below the average return on housing of about 6% that they compute based on various data sources

for recent decades for a number of different locations. Hence, they conclude that the term structure

of housing returns must be downward sloping. This confirms the evidence for the equity market

(van Binsbergen, Brandt, and Koijen 2012).

Finally, we want to emphasize that several papers in this issue study the investment characteris-

tics of property types other than housing. For commercial real estate, there of course exists a long

literature studying the properties of REIT returns (for a recent example, see Van Nieuwerburgh

(2019)). This literature mostly focuses on aggregate indexes. Also, the fact that equity REITs

9
are (modestly) levered and trade in public stock markets affects their liquidity and risk-return

characteristics. Ghent, Torous, and Valkanov (2019) recently reviewed the properties of both public

and private U.S. commercial real estate indexes going back to the 1970s. In this issue, Chambers,

Spaenjers, and Steiner (2021) find that both commercial and agricultural real estate outperformed

housing over the first eight decades of the twentieth century in the United Kingdom, with agricul-

tural (commercial) real estate exhibiting relatively high capital gains (income yields). Sagi (2021)

focuses on asset-level risk and return in the commercial real estate market, using transactions data

from the NCREIF. Andonov, Kräussl, and Rauh (2021), also in this issue, study the investment

performance of commingled closed-end infrastructure funds, and report relatively low risk-adjusted

returns. This is consistent with Gupta and Van Nieuwerburgh (2021), who find similarly poor

risk-adjusted performance for both infrastructure and real estate private equity funds. Andonov,

Kräussl, and Rauh (2021) also find that these funds on average fail to match the long-term stable

income yields of the underlying infrastructure assets, do not add much diversification to investor

portfolios, and have a risk profile more similar to that of other private equity investments. We

return to their question of how to best structure investments in infrastructure, and any other real

assets for that matter, for long-term institutional investors later in this article.

3.2 Drivers of variation in valuations and investment behavior

As highlighted in the previous subsection, the combination of market illiquidity on the one hand

and heterogeneity in subjective valuations between market participants on the other hand can lead

to dispersion in acquisition prices. One reason for variation in the willingness-to-pay by investors

can be heterogeneity in private preferences or “tastes.” Adams et al. (2021), speaks directly to

this issue by documenting international, culture-driven differences in preferences for male rather

than female art. In their large sample of historic auction prices, art produced by women sold at

a discount at auction, controlling for a variety of other factors. This discrepancy was larger in

countries with higher levels of gender inequality metrics. Their evidence is not merely historical.

Experiments reported by the authors provide additional evidence that hypothetical works of art are

10
valued less when they are identified as being made by women. The paper ties in with a growing

literature looking at the market’s evaluation of female artists (Bocart, Gertsberg, and Pownall 2018;

Cameron, Goetzmann, and Nozari 2019).

Also Andonov, Kräussl, and Rauh (2021) highlight the importance of investor preferences.

They argue that ESG considerations of public institutional investors, such as public pension funds,

sovereign wealth funds and government agencies, can partially explain their underperformance in

infrastructure. Such investors thus seem willing to trade off financial returns against nonpecuniary

benefits, in a way similar to impact investors in the venture capital industry (Barber, Morse, and

Yasuda 2021). Variation in preferences is more likely to affect investor prices and returns in illiquid

markets.

In addition to differences in preference-driven private values, heterogeneity in beliefs about

resale values can drive variation in investor behavior in markets for durable assets. Pénasse,

Renneboog, and Scheinkman (2021) build a speculative art trading model with short-sale constraints

and fluctuating differences in beliefs in the spirit of Hong, Scheinkman, and Xiong (2006). They then

study the effects of the negative shock to the expected (future) asset supply (or “float”) caused by

an artist’s premature death. The model predicts permanent increases in prices and trading volume

as both the value and the frequency of exercise of the “resale option” associated with art ownership

go up. Comparing auction price and volume trends for artists that died unexpectedly to those for

otherwise similar artists that lived longer, they find evidence in support of these predictions.

The earlier mentioned-paper of Giglio et al. (2021) highlights another important source of (cross-

sectional and time-series) variation in beliefs about the common-value component of residential

real estate, namely, climate change risk assessment. They find that transaction prices of properties

in flood zones correlate negatively with a “climate attention index” constructed from real estate

listings. The paper belongs to a fast-growing literature on the pricing of climate risk, explored in

the March 2020 issue of the Review of Financial Studies on “Climate Finance” (cf. Hong, Karolyi, and

Scheinkman (2020) and the references therein). Much of this literature focuses on housing and

its exposure to sea level rise and wildfire risk. While the early evidence on the effect of climate

11
risk exposure on housing values is mixed (Bernstein, Gustafson, and Lewis 2019; Murfin and

Spiegel 2020), Garnache (2020) and Eichholtz, Steiner, and Yönder (2019) document lower prices for

residential and commercial real estate, respectively, when disaster risk is more salient. Other recent

papers focus explicitly on heterogeneity in beliefs between agents (Baldauf, Garlappi, and Yannelis

2020; Keys and Mulder 2020; Bernstein et al. 2021).

The horizon-decomposition of housing returns inferred from very long-horizon leaseholds, as

highlighted above, combined with the fact that housing values respond to climate risk, makes

housing a suitable asset to infer the discount rates to be applied to climate mitigation investment.

Such investments have uncertain benefits that accrue in the distant future, and how to discount

these benefits is an issue of both great importance and confusion. Since such investments are hedges

and the damages from climate change that they offset are largest in the near term, Giglio et al. (2021)

argue that nearby benefits should be discounted at very low rates and further-out benefits at higher

(but still very low) rates. These discount rates change the cost-benefit calculus on climate change

mitigation investments relative to the received wisdom on discount rates in Nordhaus (2013).

Finally, Han et al. (2021) focus on how financial constraints affect equilibrium behavior of sellers

and buyers. Using a regression discontinuity design in the empirical part and a search model in the

theoretical part of the paper, they show how regulatory changes on down payment constraints have

subtle effects on the various price segments of the housing market. A macroprudential policy aimed

at curbing price growth in Toronto in the $1 million housing market segment backfired because it

generated bidding wars in the segment just below the $1 million cutoff.

3.3 Private values in other asset markets

Private values are not just relevant for real assets. Bellon et al. (2021) consider the utility that

individuals derive from owning their private business. The authors exploit a quasi-natural experi-

ment in which certain households receive large cash windfalls from mineral right claims, while

others do not. The windfalls result in the creation of more incorporated businesses (businesses

with employees), helping to overcome liquidity constraints. The windfalls also allow individuals

12
to remain self-employed for longer. The latter effect does not seem to be driven by the alleviation

of financial constraints, but rather by a demand for the nonpecuniary or private benefits of being

self-employed (Moskowitz and Vissing-Jørgensen 2002; Hurst and Pugsley 2011).

Finally, we want to highlight that private values may affect investment decisions—and thus,

potentially, valuations—outside the RPVA class. We already mentioned the recent research on

the nonpecuniary benefits derived by impact investors in private equity and venture capital. But

even liquid financial assets’ valuations may be affected by the nonfinancial preferences of investors.

Bauer, Ruof, and Smeets (2021) survey investors in a Dutch pension fund, who were given a vote on

whether the fund should focus more on sustainability issues. The proposal received strong support.

This support appeared to be mainly driven by investors’ social preferences rather than a belief that

sustainability is good for financial performance. A follow-up survey showed that investors’ support

did not weaken after they learned about the actual implementation of the sustainable investment

policy. The findings of the paper are consistent with recent lab experiments showing that investors’

moral preferences affect their valuations and allocations (Bonnefon et al. 2019; Humphrey et al.

2020).

4 Moving Forward

In this final section of our paper, we outline some, in our view, particularly exciting research areas

that hold promise for much additional work in the near future. Our goal is not to give an exhaustive

overview of all current research on RPVA. Instead, we focus on a selective set of issues related to

the ownership and trading of real assets. We thus largely ignore research related to, for example,

private values in financial assets, the financing of real asset acquisitions, or the effect of macro

factors and credit cycles on price levels in real asset markets. For housing, the latter literature is

surveyed in Davis and Van Nieuwerburgh (2014) and Guerrieri and Uhlig (2016).

13
4.1 Price formation and return heterogeneity in real estate markets

4.1.1 Realistic models of search and bargaining.

Real assets are the quintessential illiquid assets. They trade infrequently and in thin markets

because of the uniqueness of each asset’s physical characteristics and the heterogeneity in investors’

subjective valuations, which is in turn due to heterogeneity in preferences, financial constraints, and

beliefs about future fundamentals. Han and Strange (2015) review the existing literature on search

in housing markets. It strikes us as an important task to build richer search and matching models

that can be confronted with detailed asset-level data (asset features, buyer and seller characteristics,

time on the market, transaction prices, etc.). Some papers have recently pushed in the direction of

modeling real-world features of housing markets. Ngai and Tenreyro (2014) study the effects of

seasonality in housing market thickness (and thus in the quality of buyer-seller matches). Piazzesi,

Schneider, and Stroebel (2020) focus on geographical segmentation in search. Arefeva (2020) builds

a dynamic search model that accounts for bidding wars between potential home buyers with

heterogeneous valuations. Burnside, Eichenbaum, and Rebelo (2016) present a model of social

dynamics in which agents’ beliefs about housing market fundamentals change through meetings

with other agents; Bailey et al. (2018) use social network data demonstrating the empirical relevance

of this mechanism. Data from online platforms are helpful to understand the drivers of actual

search behavior (Gargano, Giacoletti, and Jarnecic 2020; Piazzesi, Schneider, and Stroebel 2020).

Researchers have also started to use search models to analyze the commercial real estate market.

The paper by Sagi (2021) included in this issue is a prime example. Badarinza, Ramadorai, and

Shimizu (2020) analyze how counterparties’ affinity with each other can mitigate cross-border

contracting frictions, leading to a matching of buyers with sellers of the same (or proximate)

nationality. Ghent (2020) focuses on market segmentation by liquidity preferences and explains why

delegated investors concentrate their commercial real estate investments in the most liquid markets.

There is scope for much more work in this area, in particular as new empirical work documents

the variation in preferences (Cvijanović, Milcheva, and van de Minne 2020) or in transaction prices

14
(Spaenjers and Steiner 2020) across different investor types in the commercial real estate space.

4.1.2 The geography of real estate investing.

One group of real estate investors that has been studied increasingly is foreign or nonlocal buyers.

These investors have been blamed for pushing up house prices, aggravating existing housing

affordability issues. Favilukis and Van Nieuwerburgh (2021) build a spatial equilibrium model of

a city to quantify the effect of an out-of-town inflow on local residents’ welfare and house prices.

Empirical work by Chinco and Mayer (2016), Badarinza and Ramadorai (2018), Barcelona, Converse,

and Wong (2019), Davids and Georg (2020), Gorback and Keys (2020), and Li, Shen, and Zhang

(2020) shows that investment demand from out-of-town or out-of-country buyers can drive up local

house prices, which gives an interesting contrast with earlier papers on the effects of immigration

(Saiz and Wachter 2011; Sá 2015).

Asymmetric information is a key characteristic of real estate markets (Garmaise and Moskowitz

2004; Kurlat and Stroebel 2015; Stroebel 2016), and may be particularly important in cross-border

transactions. Foreign home buyers may try to lower asymmetries by searching in “preferred habitats”

with high proportions of same-nationality households (Badarinza and Ramadorai 2018). Agarwal

et al. (2019a) focus on ethnic matching between buyers and sellers. Agarwal, Sing, and Wong (2019)

and Badarinza, Ramadorai, and Shimizu (2020) emphasize the importance of investors’ nationalities

in commercial real estate transactions, highlighting the roles of learning and trust, respectively,

when transacting under asymmetric information. There are natural connections between this work

and an emerging body of research in the trade literature recognizing the importance of informational

frictions (e.g., Chaney 2014). The international finance literature rarely considers cross-border trade

in RPVA. Taking into consideration the specific trading costs and market illiquidity in this asset

class strikes us an important direction for future work in international finance.

Nonlocal investors may differ from local ones on other dimensions than their information set

alone. For example, Cvijanović and Spaenjers (2020) argue that wealthy out-of-country buyers in

the Paris housing market realize lower capital gains because of their lower bargaining intensity, not

15
because of higher information asymmetries.

4.1.3 Inequality in housing markets.

A growing literature studies the role of housing for the dynamics of inequality. Real estate assets

and mortgage debt occupy a preeminent place in the household wealth portfolio, especially for

middle-class households. House price and mortgage rate dynamics therefore trigger large shifts in

that part of the wealth distribution (Rognlie 2016; Knoll, Schularick, and Steger 2017; Bach, Calvet,

and Sodini 2020; Fagereng et al. 2020; Kuhn, Schularick, and Steins 2020). The wealth-building

aspect of home ownership, emphasized in Sodini, Nieuwerburgh, and Vestman (2017), contributes

to rising financial wealth inequality when house prices go up. Existing research also suggests that

the location of upbringing (Chetty, Hendren, and Katz 2016; Miller and Soo 2021), as well as home

ownership and housing returns (Cooper and Luengo-Prado 2015; Lovenheim and Mumford 2013;

Been et al. 2021; Hacamo 2021), may have important long-run and even intergenerational effects.

The full effects of lifetime experiences in real estate markets remain to be uncovered.

Long-standing issues of racial and ethnic differences in access to the mortgage market and home

ownership have received relatively little attention in the finance literature, at least until recently.

New work in this area includes Ghent, Hernández-Murillo, and Owyang (2014), Bayer et al. (2017),

Bayer, Ferreira, and Ross (2018), Gerardi, Willen, and Zhang (2020), Stein and Yannelis (2020),

Ambrose, Conklin, and Lopez (2021), Bhutta and Hizmo (2021), Giacoletti, Heimer, and Yu (2021),

and, in the context of new FinTech business models, Bartlett et al. (2019) and Fuster et al. (2020).

Appel and Nickerson (2016) study the long-run effects of “redlining” policies that restricted access

to credit in poor and minority urban neighborhoods. Avenancio-Leon and Howard (2020) document

racial inequalities in property taxation. Future work could dig deeper into demographic variation

in the risk-return characteristics of owned housing, and, in the spirit of Agarwal et al. (2019a), the

role of race and ethnicity in housing search and matching dynamics. It could also analyze how

financial contract design can promote durable home ownership across all income levels.

Other dimensions of inequality are worth exploring more as well. For example, Sakong (2020)

16
finds that poorer households realize lower returns in the housing market because they are more

likely to buy when prices are high and to sell when prices are low. Goldsmith-Pinkham and Shue

(2020) show a substantial gender gap in housing returns stemming from differences in both market

timing and execution prices. However, Andersen et al. (2020) argue that much of the difference in

negotiated prices between single men and single women reflect gender differences in preferences

and demand for property characteristics.

4.2 Joint dynamics of prices and quantities

4.2.1 Demand-based asset pricing approaches.

The discussion in the previous subsection highlighted the importance of investor heterogeneity.

Using the tools of demand-based asset pricing developed by Koijen and Yogo (2019), Koijen and

Van Nieuwerburgh (2021) use rich data on the identity of buyers and sellers to study whether

different types of investors have different valuations for asset characteristics. The coefficients of

the hedonic pricing model come to depend on the investor composition. The ultimate goal for

the literature is to build a model that can jointly account for prices, quantities (holdings and

transactions), and liquidity measures (e.g., inventory, time on the market) in the time series and in

the cross-section.

4.2.2 Endogenous supply.

For most real assets, supply changes endogenously and often with long lags. These “hog cycles"

in development amplify price cycles in secondary markets. Land, which is an option on a future

building or infrastructure asset, is much more volatile than structures (Davis and Heathcote 2005).

Some recent papers emphasize the role of supply in explaining housing price dynamics. Head,

Lloyd-Ellis, and Sun (2014) models the response of housing construction to income shocks in a

search-and-matching model. Nathanson and Zwick (2018) study how the interaction between

development constraints and disagreement about future demand affects house prices. Ben-David,

Towbin, and Weber (2019) infer the dynamics of house price expectations from the joint dynamics

17
of prices and demand-supply disparities. Combining richer models of supply with demand-based

models is a promising area for future work.

4.2.3 Role of speculators and arbitrageurs in art and housing.

For both art and housing, a lot can still be learned about the role played by “investors”—buyers

driven by expectations of capital gains rather than consumption motives—in generating the time

dynamics of both prices and volume. One type of investor aims to profit from marketwide price

increases. Bayer et al. (2020) document substantial entry by such (amateur) “speculators” during

housing boom periods—completely mistiming the market. DeFusco, Nathanson, and Zwick (2020)

and Gao, Sockin, and Xiong (2020) argue that variation in speculative activity can play a role

in amplifying housing market cycles. By contrast, Griffin, Kruger, and Maturana (2020) find no

consistent relation between different proxies for speculation and prices in the early 2000s housing

boom and bust. Bayer, Mangum, and Roberts (2021) shows how speculative activity is contagious

and spills over geographically. Investors may be subject to larger fluctuations in the availability

and cost of credit over time and a have different propensity to default on mortgages (Albanesi,

De Giorgi, and Nosal 2019). The impact of investors on house prices may thus change over

the course of the credit cycle. An interesting question to explore further is how taxes or other

regulations targeting speculators affect outcomes and welfare (Chi, LaPoint, and Lin 2021; Favilukis

and Van Nieuwerburgh 2021). More broadly, relatively little work pursues the public finance aspects

of real estate, such as property taxation and zoning, and how they affect prices, quantities, and

population flows (e.g., Favilukis, Mabille, and Van Nieuwerburgh 2019).

Other financially driven art and housing buyers act as intermediaries or arbitrageurs, buying

undervalued assets—often from forced sellers—and bringing them back to the market quickly. In

the art auction model of Lovo and Spaenjers (2018), such “flipping” behavior arises endogenously

because of market illiquidity, and happens no matter what the state of the economy is. In the same

spirit, Bayer et al. (2020) contrast the stabilizing role of liquidity-providing “middlemen” for house

prices with the destabilizing role of speculators. Driven by the emergence of machine-learning-

18
based automated property valuation methods (Glaeser, Kincaid, and Naik 2018; Lindenthal and

Johnson 2020), one of the most important developments in the housing market is the emergence

of “iBuyers,” studied recently by Buchak et al. (2020). We foresee much more work on the role

and (expected) impact of such players on prices and quantities, and their cyclical properties, in the

various segments of the housing market.

4.2.4 Role of expectations and behavioral biases.

A quickly growing literature looks into how households’ investment choices in the housing market

are driven by their (subjective) experiences, their (potentially biased) expectations of future price

rises, and the interaction of the two (Piazzesi and Schneider 2009; Burnside, Eichenbaum, and Rebelo

2016; Glaeser and Nathanson 2017; Bailey et al. 2018; Armona, Fuster, and Zafar 2019; Kuchler

and Zafar 2019; Bottan and Perez-Truglia 2020; Liu and Palmer 2021). DeFusco, Nathanson, and

Zwick (2020) and Pénasse and Renneboog (2020) emphasize the role of extrapolative expectations in

fueling speculative booms for the housing and the art market, respectively. The two-way feedback

loop between (implicit or explicit) expectations on the one hand and investment behavior and

outcomes on the other hand deserves further study.

There is also scope for more work on how housing market beliefs drive credit demand (e.g.,

Bailey et al. 2019; De Stefani 2020) and supply (e.g., Kaplan, Mitman, and Violante 2020), which

may feed back to price movements. The relative importance of beliefs and credit conditions in

accounting for boom and bust dynamics in the housing market remains an unsettled issue (Favilukis,

Ludvigson, and Van Nieuwerburgh 2017; Greenwald and Guren 2020).

On the seller side, starting with Genesove and Mayer (2001), a literature has developed stressing

the importance of loss aversion in explaining the positive correlation between prices and volume

observed in the housing market. The loss aversion effect interacts with the down payment effect,

typically attributed to Stein (1995). However, recent work by Bracke and Tenreyo (2020) and

Andersen et al. (2021) disputes this commonly accepted explanation, arguing that loss aversion

does not play a very significant role over and above simple anchoring. Beggs and Graddy (2009)

19
show evidence for the existence of anchoring in the art market. A better theoretical understanding

of household decision-making when it comes to listing/consignment decisions—and the role of

behavioral biases therein—clearly would be helpful in order to explain the observed price and

volume dynamics.

4.3 Intermediaries

Intermediaries (e.g., real estate agents, art auction houses) play a crucial role in real asset markets.

A number of papers study the relation between house prices and (excess) entry into the real estate

agent profession (e.g., Hsieh and Moretti 2003; Begley, Haslag, and Weagley 2020). However, the

impact of time-series and cross-sectional variations in broker quality and behavior on transaction

outcomes is arguably understudied. A recent exception is Gilbukh and Goldsmith-Pinkham (2019),

who find that houses listed by inexperienced brokers have a lower probability of sale, and that this

effect is stronger during a housing bust. They propose a housing search model in which brokers

enter and exit endogenously, leading to cyclical variation in the distribution of intermediaries’

experience. For the art market, Bruno, Garcia-Appendini, and Nocera (2018) argue that auction

houses with artist-specific experience are better at predicting price outcomes.

Some other research focuses on the distorted incentives and conflicts of interest of real estate

agents. Levitt and Syverson (2008) show that brokers sell their clients’ houses more quickly and at

lower prices than their own. However, recent work that applies textual analysis to broker listings

argues this result may be due to an omitted variable bias (Liu, Nowak, and Smith 2020). Still,

real estate agents sometimes have clear informational advantages that may allow them to, for

example, “cherry-pick” cheaper listings or to obtain larger discounts from weak sellers (Agarwal

et al. 2019b). Barwick, Pathak, and Wong (2017) find that real estate agents steer buyers to high-

commission properties. There is clearly scope for more work here. Related to earlier-mentioned

issues, future studies could also dig deeper into the role of real estate agents in the matching (or not)

of counterparties of different nationalities or racial or ethnic groups, and the effects on transaction

outcomes.

20
 An understudied aspect of intermediaries is their role as information producers or providers.

Some recent papers show how real estate advertisements provide otherwise difficult to observe

information about properties’ quality (Liu, Nowak, and Smith 2020; Nowak and Smith 2020; Shen

and Ross 2021). Other work focuses on presale appraisals of items’ market values. For example,

Aubry et al. (2020) show that art auction house estimates are systematically biased, which could

be due to behavioral biases, but also to strategic reasons. Similar mechanisms may play a role in

housing appraisals as well (Salzman and Zwinkels 2017). Future research should help improve our

understanding of the competitive considerations that underlie intermediaries’ asset valuations, and

their effects on the equilibrium behavior of buyers and sellers. Already some evidence points to

appraisals causally affecting transaction prices (Aubry et al. 2020; Lu 2020).

4.4 Alternative ways to invest in real assets

Institutional investors access real estate and infrastructure investments both through public equity

and debt markets and through private equity and debt markets. The general trend seems to be for an

increasing allocation to alternative assets held outside public equity vehicles. Andonov, Kräussl, and

Rauh (2021) ask an important question in this issue: do investors hold RPVA investments in the right

vehicles? Do commingled closed-end private equity funds provide a good structure for pension

funds, sovereign wealth funds, or endowments to invest in real assets given the long-term nature of

their liabilities? How does the after-fee performance of such investments compare to coinvestments

or direct asset investments? Do pension funds have the expertise to pull off such direct investments

successfully, maybe by forming consortia, as was done in Canada (Lipshitz and Walter 2020)? Do

investors shy away from public markets since it absolves them from having to mark positions to

market, creating an “illiquidity premium," as suggested by Gupta and Van Nieuwerburgh (2021)?

More empirical work is needed to carefully measure the risk-adjusted performance (before and

after fees) of the various modes of investing in real assets. More theoretical work is needed to

develop the optimal contractual structures for different types of institutional investors.

Both for real estate and for collectibles, some popular discussion revolves around “tokenization.”

21
Limited academic research has tackled this topic so far. For collectibles, Vorsatz (2020) develops a

model of tokenization and argues that it can be welfare improving. A complementary perspective

is offered by Whitaker and Kräussl (2020), who argue that a fractional equity system for artworks

can be a tool for diversified investment and democratized access to the art market, while allowing

artists to retain a share in the upside potential that their work creates. There is room for new

models of financing that unlock some of the value and help share the risk in RPVA assets.

4.5 Prices and preferences in collectibles markets

We can think of the private use value associated with the possession of an artwork as an “emotional

dividend” (Lovo and Spaenjers 2018), which is worth what the owner would be willing to pay

for one period of enjoyment. Barring pressure from investment demand, including the occasional

need for a discrete and portable store of wealth (Oosterlinck 2017), prices of artworks and other

collectibles are thus determined at the intersection of the distribution of purchasing power and that

of tastes. Research has indeed shown a strong impact of wealth dynamics on the willingness-to-pay

for collectibles (Aït-Sahalia, Parker, and Yogo 2004; Hiraki et al. 2009; Goetzmann, Renneboog, and

Spaenjers 2011; Dimson, Rousseau, and Spaenjers 2015). Oster and Goetzmann (2003) study the

role played by urban concentrations of wealth in the economics of local museums, emphasizing

the social dimension of the nonmonetary dividends supplied by art. Moving from wealth to tastes,

common (and seemingly lexicographic) preferences for certain highly ranked experiences can

clearly have unusual economic effects supporting extreme and puzzling variations in prices for

practically indistinguishable goods. The details of collectors’ preferences and their associated values

are difficult to measure and model economically, but may have first-order effects. Differential

preferences can derive from variation in past aesthetic experiences, social signaling, identity

construction, and many other factors (Spaenjers, Goetzmann, and Mamonova 2015).

Research into the pricing of aesthetic features has arguably been hampered by blunt econometric

tools. Hedonic regressions typically project the characteristics of artworks to prosaic indicator

variables, with the most relevant being the artist. Advances in computer vision and machine

22
learning have opened up new possibilities for studying the subtleties of the pricing of style and

features detectable optically (Pownall and Graddy 2016; Ma, Noussair, and Renneboog 2019; Aubry

et al. 2020). Future work may build on new methods that visually compare objects to each other

and computationally measure creativity (Elgammal and Saleh 2015). There also may be scope

for research that constructs crowdsourced proxies for attractiveness, as already has been done to

evaluate metropolitan areas (Carlino and Saiz 2019).

Also new statistical methods applied to transaction and art historical data can enable a better

understanding of the formation of aesthetic tastes and the dynamics of fashion. Goetzmann

et al. (2016) develop an empirical classification of styles based on a manifold clustering algorithm

applied to auction prices. Fraiberger et al. (2018) use network analysis to model the paths of highly

successful contemporary artists, showing the importance of early access to prestigious central

institutions, suggesting a high level of demand coordination.

Finally, there is definitely room for more experimental research examining the drivers of private

enjoyment and willingness-to-pay. As noted before, Adams et al. (2021), in this issue, study

experimentally how appreciation of artworks depends on the (perceived) gender of the artist. Other

recent studies have generated further insights into the aesthetic experience. Ma, Noussair, and

Renneboog (2019) study how colors can affect emotions and valuations. Newman and Bloom

(2012) explore when and for which reasons original artworks and artifacts are considered more

valuable than duplicates. Related research finds that people value objects that enhance their sense

of proximity to the artist or to collectors with similar preferences (Newman and Smith 2016; Smith,

Newman, and Dhar 2016).

As more sophisticated methods for the study of aesthetics become available, future researchers

can build on insights from both neuroaesthetics (Chatterjee and Vartanian 2014) and neuroeconomics.

Interestingly, neurological research suggests that the relation between experienced utility and prices

may not be a one-way street (Plassmann et al. 2008), arguably providing a biological microfoundation

for models in which the price of a collectible directly enters the utility function (Mandel 2009).

23
4.6 Big challenges for real estate and infrastructure markets

The Covid-19 crisis has raised important questions about the future of cities and the future of work,

with direct and indirect implications for housing markets, commercial real estate markets (office,

e-commerce), and infrastructure (e.g., safety and financial viability of public transit). Gupta et al.

(2021) study changes in residential rents and prices in urban versus suburban locations resulting

from pandemic-induced household migration. Ling, Wang, and Zhou (2020) study the impact of

the pandemic on asset-level commercial real estate across different categories, largely resulting from

temporary restrictions on business activity. Delventhal, Kwon, and Parkhomenko (2020) and Davis,

Ghent, and Gregory (2021) study housing prices in spatial equilibrium models where households

choose where to locate when the technology for working from home improves. The pandemic has

also underscored the need for a better understanding of how public health shocks affect real estate

markets (Wong 2008; Custódio, Cvijanović, and Wiedemann 2020; D’Lima and Thibodeau 2021;

Francke and Korevaar 2021).

Climate change and the energy transition it has set in motion directly affects the built envi-

ronment and the infrastructure that supports it. Technological innovations, such as driverless

cars (Zakharenko 2016), and the sharing economy (Calder-Wang 2020) intersect with the climate

imperative in interesting ways. Better cost-benefit analysis of investments in energy efficiency and a

quantification of the risk of economic obsolescence (stranded real assets) are needed. The increased

focus on sustainability by institutional and retail investors in equity and debt markets (green bonds)

and in property markets (green buildings) will continue to be an important research theme.

Finally, there are large unmet infrastructure needs in the developed world, but even more so in

developing countries where most of the growth in the world population takes place (Walter 2016).

Infrastructure investments run up against fiscal constraints everywhere. Capturing some of the

newly created value of infrastructure additions (Gupta, Van Nieuwerburgh, and Kontokosta 2020),

for example, through property taxes, can be a useful tool in a broader arsenal of financing options.

Much work is needed to assess risk and return of infrastructure projects in emerging markets and

to find ways to bridge the financing gap (Gardner and Henry 2021).

24
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Appendix. Size of the Real and Private-Value Asset Class
This appendix describes the data sources and calculations behind Table 1, which computes the
total value of the stock of RPVA in the United States. The three main data sources are the Financial
Accounts of the United States of the Federal Reserve Board (FAUS); the Fixed Assets Accounts of the
Bureau of Economic Analysis (FAA); and Vorsatz (2020).

Residential real estate

We use the 2020.Q3 value for FAUS series LM155035015.Q: Households; owner-occupied real estate
including vacant land and mobile homes at market value. This series excludes the assets belonging to
nonprofit organizations from the household and nonprofit sector.

Commercial real estate

We compute the 2020.Q3 value as the sum of:
• FAUS series LM165035005.Q: Nonprofit organizations; real estate at market value
• FAUS series LM105035005.Q: Nonfinancial corporate business; real estate at market value
• FAUS series LM115035005.Q: Nonfinancial noncorporate business; real estate at market value
• the market value of real estate held by equity REITs,
where we calculate the latter component as the sum of the aggregate market capitalization of equity
REITs from NAREIT as of November 2020 and financial liabilities of equity REITS (FAUS series
FL124190005), and subtract financial assets of equity REITs (FAUS series FL124090005). Real estate
assets held by equity REITs are estimated at $1.70 trillion in 2020.Q3.
While we prefer the market valuation methodology used in the FAUS data, it is limited in its
breakdown of subcategories of CRE. To estimate the subcategory breakdown, we employ table 2.1:
Current-Cost Net Stock of Private Fixed Assets, Equipment, Structures, and Intellectual Property Products by
Type in the FAA, which offers detailed estimates of the cost of different types of structures. Because
the FAA computes book values (which reflect depreciation) and the FAUS computes market values,
we use the FAA data only to compute shares, and then multiply these shares by the aggregate CRE
market value from the FAUS. The latest FAA data available are for 2019. We consider the following
subcategories:

• Multifamily: residential structures, five or more units (line 71)

• Office (line 38)
• Retail: multimerchandise shopping (line 44), food and beverage establishments (line 45), and other
commercial (line 47), which consists of auto dealerships, garages, service stations, drug stores,
restaurants, mobile structures, and other structures used for commercial purposes
• Industrial: warehouses (line 46) and manufacturing (line 48)
• Hospitality: lodging (line 60) and amusement and recreation (line 61)
• Health care (line 39), which consists of hospitals, special care, and medical buildings
• Student housing: other residential (line 75), which consists primarily of dormitories and of
fraternity and sorority houses

Alternatively, one can value commercial real estate in a bottom-up manner using data on CRE
transactions. Koijen and Van Nieuwerburgh (2021) use data from Real Capital Analytics on all sales
above $10 million of CRE assets in the four core sectors (apartments, office, retail, and industrial)

34
between 2001 and 2020 to estimate a hedonic pricing model for each sector and geographic market.
They then revalue the stock of all assets that ever traded over this 20-year period as of the end of
2019. The column labeled “RCA data” in Table 1 reports the results.
The main breakdown in Table 1 shows nontrivial values for noncore CRE sectors. The latter
have been growing in importance relative to the four core sectors over the past decade. Some
classify cell phone towers and data centers as CRE assets as well. In our calculations, those are
included as infrastructure.

Agricultural real estate

We use the estimate of the year 2020 value of farm real estate according to the U.S. farm sector
financial indicators published by the U.S. Department of Agriculture in February 2021.

Infrastructure
We focus on privately held infrastructure assets in the United States. As before, we use FAA table
2.1. We decompose infrastructure assets into the following components:

• Power (line 50)

• Electrical transmission equipment (line 17)
• Communication (line 53)
• Transportation (line 62)
• Water, sewage, and waste treatment (line 66)
• Petroleum and gas (line 55)
• Mining (line 56)
• Social infrastructure: religious (line 58) and educational and vocational (line 59)

Collectibles
Estimates for the worldwide value of the different collectible categories shown in Table 1 come from
Vorsatz (2020). We thank the author for generously sharing his data. To estimate the total value
of the float for these items, he combines a survey of the collectibles holdings of high net worth
individuals (Barclays 2012) with year 2017 data on the distribution of wealth (Credit Suisse 2017).
His Appendix C contains the details. To transform his global estimates to U.S. values, we multiply
by the estimated share of the United States in worldwide household wealth according to Credit
Suisse (2017), which is 33%. Finally, we group together “fine art pictures & paintings” and “fine art
sculptures.”
Apart from the categories shown in the table, Vorsatz (2020) also estimates the aggregate value
of worldwide holdings of a number of other collectible types. Using the same methodology as
before would lead to the following estimates of the value of U.S. holdings: $819 billion for classic
cars, $567 billion for coins, $480 billion for tapestries and rugs, $345 billion for wine, and $209
billion for stamps. These numbers strike us as implausibly large given what we know about annual
turnover in these markets. One explanation is that wealthy households overestimate the market
value of their holdings in these collectible types. In particular, collections of coins, stamps, and wine
often consist of large numbers of items with relatively limited resale values. Another explanation is
that the survey oversampled owners of collectibles that are less widely-held than precious jewelry,
fine art, and antique furniture.

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Noncorporate business equity
We take the 2020.Q3 value for FAUS series LM112090205.Q: Nonfinancial noncorporate business;
proprietors’ equity in noncorporate business (net worth), and subtract real estate equity computed as
the difference between series LM115035005.Q: Nonfinancial noncorporate business; real estate at market
value and series FL114123005.Q: Nonfinancial noncorporate business; loans; liability.

36