The influence of herding behaviour on house prices

Christian Hott (Zurich Insurance Group, Zurich, Switzerland)

Journal of European Real Estate Research

ISSN: 1753-9269

Publication date: 19 October 2012

Abstract

Purpose

A comparison of fundamental house prices with actual prices indicates that house prices fluctuate more than fundamentally justified, a fact difficult to explain with standard rational agent models. The purpose of this paper is to evaluate to what extent herding behaviour among investors can be seen as an explanation for deviations of house prices from their fundamental value.

Design/methodology/approach

To see whether house prices fluctuate more than fundamentally justified, the paper calculates a fundamental house price and compares it to the actual price for seven European and three non‐European OECD countries. Then the paper incorporates herding behaviour into the house‐price model and examines its influence on the development of prices.

Findings

A comparison of the fundamental house prices with actual prices indicates that house prices fluctuate more than fundamentally justified. The calibration of the herding model indicates that it can help to explain fluctuations of actual house prices.

Originality/value

The incorporation of herding behaviour into a housing model and the calibration of its impact are the main innovations of this paper.

Keywords

Citation

Hott, C. (2012), "The influence of herding behaviour on house prices", Journal of European Real Estate Research, Vol. 5 No. 3, pp. 177-198. https://doi.org/10.1108/17539261211282046

Download as .RIS

Publisher

:

Emerald Group Publishing Limited

Copyright © 2012, Emerald Group Publishing Limited

Please note you might not have access to this content

You may be able to access this content by login via Shibboleth, Open Athens or with your Emerald account.
If you would like to contact us about accessing this content, click the button and fill out the form.
To rent this content from Deepdyve, please click the button.