Betting on the House: Subjective Expectations and Market Choices

44 Pages Posted: 22 May 2020 Last revised: 19 Jun 2020

See all articles by Nicolas L. Bottan

Nicolas L. Bottan

Cornell University - Department of Policy Analysis and Management

Ricardo Perez-Truglia

University of California, Berkeley; National Bureau of Economic Research (NBER)

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Date Written: April 25, 2020


Home price expectations play a central role in macroeconomics and finance. However, there is little direct evidence on how these expectations affect market choices. We provide the first experimental evidence based on a large-scale, high-stakes field experiment in the United States. We provided information by mail to 57,910 homeowners who recently listed their homes on the market. Collectively, these homes were worth $34 billion. We randomized the information contained in the mailing to create non-deceptive, exogenous variation in the subjects' home price expectations. We then used rich administrative data to measure the effects of these information shocks on the subject's market choices. We find that, consistent with economic theory, higher home price expectations caused the subjects to delay selling their homes. These effects are statistically highly significant, economically large in magnitude, and robust to a number of sharp checks. Our results indicate that market choices are highly elastic to expectations: a 1 percentage point increase in home price expectations reduced the probability of selling within six months by 2.45 percentage points. Moreover, we provide evidence that this behavioral elasticity would be even higher if it were not for the presence of optimization frictions.

Keywords: expectations, experiment, housing market, information

JEL Classification: C81, C93, D83, D84, R31

Suggested Citation

Bottan, Nicolas Luis and Perez-Truglia, Ricardo, Betting on the House: Subjective Expectations and Market Choices (April 25, 2020). Available at SSRN: or

Nicolas Luis Bottan

Cornell University - Department of Policy Analysis and Management ( email )

Ithaca, NY
United States
6072555724 (Phone)

HOME PAGE: http://

Ricardo Perez-Truglia (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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