Peer Sentiment and Firm Production Decisions: Evidence from Homebuilders

Thao Le ()
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Thao Le: Georgia State University

The Journal of Real Estate Finance and Economics, 2025, vol. 71, issue 3, No 6, 510-544

Abstract: Abstract This paper examines the effect of peer sentiment on firm production decisions using data from public homebuilders in the US. Peer sentiment is measured by the NAHB/Wells Fargo Housing Market Index, derived from a monthly survey of homebuilders’ perceptions about the housing market. A one-standard-deviation increase in the peer sentiment index induces an average builder to increase their land inventory by 6.4% (4,937 lots) and building expenses by 5.9% ($34.5 million). The effect is weaker when firms are highly divided in their opinions. Following peer sentiment does not affect stock price performance, but overbuilding is associated with a lower return-on-asset.

Keywords: Peer effect; sentiment; homebuilders; production; housing supply (search for similar items in EconPapers)
JEL-codes: D22 D83 G41 R31 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11146-024-09976-1

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