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Spillovers in Asset Prices: The Curious Case of Haunted Houses

45 Pages Posted: 30 Nov 2017  

Utpal Bhattacharya

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management

Daisy J. Huang

Nanjing Audit University

Kasper Meisner Nielsen

Hong Kong University of Science & Technology (HKUST) - Department of Finance

Date Written: November 27, 2017

Abstract

Exploiting the unique institutional setting of Hong Kong’s real estate market, we uncover a curious ripple effect of haunted houses on the prices of nearby houses. Prices drop on average 20% for units that become haunted, 5% for units on the same floor, 3% for units in the same block, and 1% for units in the same estate. Our study makes two contributions. First, our results provide an estimate of a large negative spillover on asset prices caused by an idiosyncratic shock to the perceived quality of an asset. Second, since we observe that this ripple effect exists even if the haunted house is not sold, we can isolate the quality channel from the price pressure channel. We find that the quality channel contributes significantly to spillovers in asset prices.

Keywords: spillovers in prices, price pressure channel, quality channel, haunted houses

JEL Classification: D62, H23, R21, R31

Suggested Citation

Bhattacharya , Utpal and Huang, Daisy J. and Nielsen, Kasper Meisner, Spillovers in Asset Prices: The Curious Case of Haunted Houses (November 27, 2017). Available at SSRN: https://ssrn.com/abstract=3077951 or http://dx.doi.org/10.2139/ssrn.3077951

Utpal Bhattacharya (Contact Author)

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management ( email )

Clear Water Bay
Kowloon
Hong Kong

Daisy J. Huang

Nanjing Audit University ( email )

86 Yushan Rd(W)
Nanjing, Jiangsu 211815
China

Kasper Meisner Nielsen

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong

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