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Do people overreact?

by Deng, Guoying
Authors: Gan, Li | Hernandez, Manuel A. Series: NBER working paper series . 19515 Published by : NBER (Cambridge) Physical details: 50 p. Subject(s): Mercado da habitação | Preço da habitação | Sismo | Comportamento | Estudos de caso | Modelos | China --Wenchuan Year: 2013
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Item type Location Call number Copy Status Date due
Documento de trabalho Documento de trabalho Instituto Superior de Economia e Gestão
ISEG (iseg)
Serial 155//19515 (Browse shelf) 1 Sem empréstimo

This paper uses the 2008 Wenchuan earthquake in China as a natural experiment to examine how the housing market reacted to this unforeseen, extreme event. We use a unique transaction dataset for new (under construction) apartment units to analyze the pricing behavior of units in lower versus upper floors before and after the earthquake. We observe that average housing prices decreased after the tremor. However, the relative price of low to high floor units, particularly units located in the first and second floor, considerably increased for several months after the earthquake. This relative pricing pattern is in line with a higher risk perception and fear, triggered after the tremor, of living in upper floors. Additional robustness checks support the apparent overreaction of individuals to a dramatic event.

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