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TESTING FOR MICRO‐EFFICIENCY IN THE HOUSING MARKET

Andre Anundsen () and Erling Røed Larsen

International Economic Review, 2018, vol. 59, issue 4, 2133-2162

Abstract: Using highly granular transaction‐level data for the Norwegian housing market over the period 2002–2014, we investigate whether excessive prices persist or revert in repeat sales. Excessiveness in prices is detected by comparing selling prices to predicted prices implied by a hedonic model, which includes a rich set of attributes. Persistence is rejected and there is substantial reversion in excessive prices. Our results also show little scope for profitable arbitrage by investing in apparently underpriced units. We suggest that excessive prices are related to the stochastic arrival of interested purchasers at public showings, which we show is nonrepeatable.

Date: 2018
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https://doi.org/10.1111/iere.12332

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Working Paper: Testing for micro efficiency in the housing market (2016) Downloads
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International Economic Review is currently edited by Michael O'Riordan and Dirk Krueger

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