A Metropolitan Analysis of Investor Herding and House Price Bubbles

Matthew Pollock

ERES from European Real Estate Society (ERES)

Abstract: This study examines the connection between investor herding and house price bubbles in US metropolitan markets. Contrary to widely accepted theory on herding as a prime motivator for price bubbles, limited evidence is found to support this proposition. Rather, there is empirical support to suggest that price bubbles, proxied by excess returns, are in fact the motivator for investor herding. There are substantial time delays in the mechanism which are particularly relevant for discussions of market efficiency and persistence in behaviour. Furthermore, there is significant evidence of a relationship between reverse herding and price bubbles that is supported by a consideration of market structure and access to private information. The idiosyncratic impacts of price volatility on market dynamics are also included with a focus on constructing a leading indicator. Finally, the study assesses the relative impacts of local and national determinants on the extent of herding and price bubbles.

Keywords: Bubbles; Herding; housing (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2023-01-01
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2023_187

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