Market news and credibility cues improve house price predictions: An experiment on bounded rationality in real estate

Ozan Isler, Terry Flew, Isil Erol and Uwe Dulleck

Journal of Behavioral and Experimental Finance, 2021, vol. 31, issue C

Abstract: We experimentally study bounded rationality in real estate by observing the effects of market news and media credibility cues on house price predictions. Non-professional market actors read news articles about recent house price trends from online news sources varying in perceived trustworthiness and brand anonymity, and then predicted selling prices of apartments for monetary reward. Boundedly rational actors are expected to make (imperfect) use of public information and rely on contextual ques to infer information quality. Price predictions were in the opposite direction of market trends in a control condition without market news. As hypothesized, (1) market news on price trends increased the accuracy of predictions, and (2) information from a more credible medium had stronger effect on price predictions when its brand was made visible. Systematic inaccuracies in price predictions, their improvement with market information, and reliance on credibility cues suggest that non-professional property valuations are boundedly rational.

Keywords: Bounded rationality; Real estate markets; Economic experiment; Price predictions (search for similar items in EconPapers)
JEL-codes: C90 D84 R31 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:31:y:2021:i:c:s2214635021000940

DOI: 10.1016/j.jbef.2021.100550

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