Abstract

http://ssrn.com/abstract=2274343
 


 



Trend-Chasing and Home Price Dynamics: Evidence from a Novel Index Measure of Housing Sentiment


Major Coleman IV


Syracuse University - Whitman School of Management

January 22, 2014


Abstract:     
Previous studies suggest the housing asset class is vulnerable to sentiment, particularly overextrapolation bias (Shiller (1990)). I specify home price dynamics as a function of overextrapolation-based trend-chasing, and a sentiment-correction when the mispricing becomes large and more recognizable. To calibrate this specification and avoid the difficulties with measuring fundamental values directly, I construct indices of housing sentiment called HSENT. I find momentum dominates the sentiment correction component of price dynamics until HSENT becomes extreme. Over 3-10 years HSENT negatively predicts housing returns, but positively predicts various housing risks, which is consistent with HSENT capturing bias in investor expectations.

Number of Pages in PDF File: 62

Keywords: Housing sentiment, momentum, housing bubble, residential, real estate, behavioral finance

JEL Classification: G02, G11, G12, G14, R31

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Date posted: June 5, 2013 ; Last revised: January 27, 2014

Suggested Citation

Coleman, Major, Trend-Chasing and Home Price Dynamics: Evidence from a Novel Index Measure of Housing Sentiment (January 22, 2014). Available at SSRN: http://ssrn.com/abstract=2274343 or http://dx.doi.org/10.2139/ssrn.2274343

Contact Information

Major Coleman IV (Contact Author)
Syracuse University - Whitman School of Management ( email )
Syracuse, NY 13244
United States
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