The Anchoring Effect of Historical Peak to House Price

Fu Shuen Shie

Journal of Real Estate Research, 2019, vol. 41, issue 3, 443-472

Abstract: Recent research has found significant evidence of a 52-week high affinity effect in the stock market. A stock's historical highest price, in the previous 52 weeks, approximately one year, exhibits an anchoring effect on investor decisions. In this paper, I examine whether the highest past price, over several years, can contribute to predicting returns in the real estate market. I find the 9-year high has a positive relation with the return of house prices, while the 2-year high shows a negative relationship in the U.S. housing market. Additionally, economic variables have differing effects on the behaviors of households when considering prices within the context of the threshold point of the highest price of the previous years. This is the first investigation to highlight the importance of an n-year high in the housing market.

Date: 2019
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DOI: 10.22300/0896-5803.41.3.443

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