Real Estate Prices: An International Study of Seasonality’s Sentiment Effect
Bar Ilan University
Hebrew University of Jerusalem - Jerusalem School of Business Administration
November 1, 2011
Journal of Empirical Finance, Vol. 19, Issue 1, pp. 123-146, January 2012
The current study shows that real estate prices in several countries reveal a significant and persistent seasonality, where the highest rates of return are obtained in the spring and early summer, and the lowest rates of return are obtained in the fall. This seasonality is explained by a joint effect of the change in the number of daylight hours and the latitude of the area zone under consideration. Notably, latitude affects real estate prices above and beyond the effect of the change in the number of daylight hours, which by itself is a function of latitude. This joint effect is robust to the two explanations for seasonality given in the literature: the Matching Theory and the Bargaining Power Hypothesis, as well as to several macroeconomic variables. The effect also conforms to the well-known Seasonal Affective Disorder (SAD), which has been found in other studies to affect people’s health, their risk attitude, and consequently their risk perception and investment decisions which, in turn, affect asset prices.
Keywords: market sentiment, real estate prices, prices seasonality, behavioral economics
JEL Classification: A12, A14, C78, D03, E3, G14, R31Accepted Paper Series
Date posted: July 26, 2009 ; Last revised: February 28, 2012
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