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Do as I Say, Not as I do: The Role of Advice versus Actions in the Decision to Strategically Default

Michael J. Seiler ()
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Michael J. Seiler: The College of William & Mary

Journal of Real Estate Research, 2015, vol. 37, issue 2, 191-216

Abstract: This study examines relative private signal strength and finds that offered advice is significantly more influential in changing strategic mortgage default proclivity than is observed actions. Moreover, these private signals are more reflective of financial herding than they are of an information cascade. From a policy perspective, herds are easier to reverse than are cascades making more effective policies aimed at curbing the incidence of strategic mortgage default. Interestingly, an informationally equivalent change in private signal strength across actions and advice alters strategic default willingness, but not the moral stance of borrowers which demonstrates the complexity of this life-altering financially and emotionally impactful decision.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:jre:issued:v:37:n:2:2015:p:191-216