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Expectations of future market conditions are acknowledged to be crucial for the development decision and hence for shaping the built environment. The purpose of this paper is to study the central London office market from 1987 to 2009 and test for evidence of rational, adaptive and naive expectations.

Two parallel approaches are applied to test for either rational or adaptive/naive expectations: vector auto‐regressive (VAR) approach with Granger causality tests and recursive OLS regression with one‐step forecasts.

Applying VAR models and a recursive OLS regression with one‐step forecasts, the authors do not find evidence of adaptive and naïve expectations of developers. Although the magnitude of the errors and the length of time lags between market signal and construction starts vary over time and development cycles, the results confirm that developer decisions are explained, to a large extent, by contemporaneous and historic conditions in both the City and the West End, but this is more likely to stem from the lengthy design, financing and planning permission processes rather than adaptive or naive expectations.

More generally, the results of this study suggest that real estate cycles are largely generated endogenously rather than being the result of large demand shocks and/or irrational behaviour.

Developers may be able to generate excess profits by exploiting market inefficiencies but this may be hindered in practice by the long periods necessary for planning and construction of the asset.

This paper focuses the scholarly debate of real estate cycles on the role of expectations. It is also one of very few spatially disaggregate studies of the subject matter.

The purpose of this paper is to explore cultural sources of variation on consumers’ expectations and evaluations of service quality within local emerging markets.

The authors employ a multi-method approach. The multi-method research design utilizes: first, netnography to examine foreign consumers’ blogs and online communities; second, interviews with local and foreign consumers to unveil critical incidents in service encounters; and third, an online survey of 139 foreign consumers living in Chile and 460 Chilean consumers to map differences in their expectations and evaluations of services.

A general analysis of local and foreign consumers living in an emerging market reveals that these two groups do not differ significantly in their expectations of service quality. The authors also find that differences in expectations and evaluations of service quality within a local emergent market are only partially explained by aggregating consumers according to their country or region of origin. Finally, the findings demonstrate that examining cultural differences at the individual level generates a better understanding of how cultural factors impact consumer expectations and evaluations of service quality within emerging markets.

The research is limited to one emerging market (Chile) and focusses largely in one industry (banking). Further research should be conducted to examine the findings in other contexts, including developed markets, and to identify how other cultural differences (e.g. language mastery) within local markets may impact consumer expectations and evaluations of services.

Service companies operating in emerging markets should account for cultural differences when determining service standards and protocols. These differences may cut across the local-foreign divide and suggest that profiling foreign customers depending on their country of origin is not the most adequate approach for providing excellence in service and enjoying the benefits that follow.

Foreign consumers living in a local market are frequently considered a homogeneous group distinct from local consumers, and are treated as such by public and private service providers. The study demonstrates that foreign consumers may be more or less similar to local consumers depending on their cultural values, and should not be considered as a uniform group.

The findings extend research on consumer expectations and evaluations of service quality to account for cultural diversity within local emerging markets. The authors demonstrate that a cluster-approach to examining consumer expectations and evaluations of service quality better accounts for variations due to cultural values within local markets.

The purpose of this paper is to explore the direct and exclusive effects of this rather unconventional monetary policy on financial markets, economic activity and labor markets across the Eurozone.

Using a range of variables, the analysis employed the Markov-switching dynamic regression methodological approach.

The findings provided evidence in favor of the reduction of short- and log-term credit spreads, increased stock prices, improved market expectations, recovered labor market conditions and economic productivity, while the primary transmission channel of the quantitative easing policy is the expectations channel.

The novelties of this paper are twofold: it makes use of a wide data set to investigate the effect of economic and financial variables on productivity, labor markets, bond markets and equity markets in the Eurozone; and the analysis focuses on the direct effects of monetary base increases on the Eurozone economy, as well as on Eurozone financial markets.

The objective of this paper is to demonstrate that the Pygmalion hypothesis is supported in the housing market and the hypothesis that investors are, all too frequently, unrealistically over‐optimistic cannot be rejected.

The methodology in the paper relies on a cross‐sectional questionnaire survey and a longitudinal telephone survey.

The findings in the paper demonstrate that self‐fulfilling prophecies occur in property markets. The effect of self‐fulfilling expectations is common and more powerful than rational real estate fundamentals. The consistent pattern of significant over‐forecasting of housing prices suggest that the hypothesis that investors are, most of the time, over‐confident cannot be rejected.

In the longitudinal survey in this paper, only limited samples were secured. The developmental change of attitudes and buying behaviors over time was not observed. People's price expectations might be different from those reported in the first three waves of survey, as real estate fundamentals change from time to time.

In the paper a forward looking approach is used to solicit people's views on current and future housing prices, investment considerations and sentiment over time. An increase in property price being simply the outcome of self‐fulfilling expectations – the Pygmalion Effect will be signaled to housing participants. Studying people's confidence and sentiments helps understand speculative enthusiasm or ‘bubble”.

The longitudinal survey in the paper on people's price expectations is the first of its kind in Hong Kong. The results are beneficial to policy makers, homeowners, potential homebuyers and investors. Housing decisions of potential homebuyers can be made more rationally and Government officials can have more reliable property information and data for policy formulation.

This paper aims to investigate the impact of uncertainty on the predictive power of term spread and its components for future stock market returns and economic activity in Korea and the USA. This paper finds that the stock market’s expected excess return and growth of economic activity are positively related to the risk-neutral expectation, one of the term spread’s components, particularly during high uncertainty periods. These findings are consistent with the importance of the monetary policy by the central bank in a high uncertainty environment created by unexpected shocks. The results are robust to alternate definitions of high uncertainty periods.

The purpose of this paper is to estimate the expectations component contained in the asking price of residential property, in order to assess whether expectation plays a relevant role in house price appreciation. The paper tests the role of housing characteristics and value perception on asking price.

The hypothesis tested in this paper is that asking price of residential properties includes an element of price expectation. The analysis utilises a valuation database of about 1,900,000 records for the Spanish housing market, each record contains information on the price that owners expect to obtain on the sale of their property and housing and neighbourhood characteristics. There are three stages to the analysis. Regression analysis is used to estimate the hedonic models and separate that part of the price arising from housing heterogeneity, a two‐stage least squares model estimates the role of expectations and a metadata approach measures those characteristics that explain the change in the explanatory power of the hedonic models over time.

The results show that the explanatory power of hedonic models change with time suggesting that the point in the market cycle modifies the perception of price. The results indicate that the theoretical variables which explain expectations account for about 8 per cent of price, with most of the unexplained element of asking prices due to reasons related with local market conditions.

This paper offers two original insights. First, the paper presents analysis based on asking prices and shows how this could be used as a tool to measure house price expectations. Second, the paper provides further perspectives of the Spanish housing market based on a major database of observations.

Consumer expectation not only influences purchase decision but also post-purchase satisfaction and word-of-mouth (WOM). This study aims to develop theories of initial expectation management by suggesting when it is desirable for new products to raise or lower consumer expectations. It systematically examines the interplay of product value and consumer heterogeneity in the dynamic process of new product diffusion under competition.

Drawing on traditional diffusion and choice models, this study develops an agent-based model to formalize and analyze how consumers’ initial expectations of a new product influence the interdependent processes of product sales, consumer satisfaction and WOM. The simulation analyses in controlled settings help understand the underlying mechanisms in a stepwise manner.

The results show that, although the optimal strategy for low-value products is to induce consumer expectations higher than product value, high-value products are better introduced with expectations formed close to it. The results also highlight an important drawback of “under-promising” strategies in reducing the base and volume of WOM. Further, the analysis illustrates how consumer heterogeneities in product valuation and initial expectation affect the effectiveness of expectation management. For high-value products, both heterogeneities reduce the effectiveness of the optimal strategy. For low-value products, however, value heterogeneity enhances the effectiveness, whereas expectation heterogeneity reduces it.

Firms introducing new products should be sensitive to how consumers value the product and form expectations about it. Different from firms that must rely on aggressive advertising to sell inferior products by building up high expectations, those with superior products can rely more on the power of consumer WOM, which is much less costly and thus gives them a competitive advantage. Firms should also pay attention to how diversified the consumers are in product valuation and expectation. The expectation management strategy is more effective when consumers form more similar expectations. Inferior firms may leverage this mechanism to neutralize their disadvantages.

The articulated mechanisms help push forward the research on new product diffusion and consumer expectation management. To the best of the authors’ knowledge, this is one of the first studies to systematically analyze the impact of consumer heterogeneity on the effectiveness of expectation management.

The paper aims to test the rational‐expectations hypothesis using data from the Chinese stock market.

The rational‐expectations hypothesis plays a critical role in economic and financial studies. However, it is unclear whether this hypothesis is consistent with real‐world decision making since existing empirical results are mixed. This paper tests the hypothesis directly using survey data from China's stock market by developing a technique to analyze discrete or limited independent‐variable models.

The paper shows that in China's stock market survey forecasts are overly optimistic, especially with positive information, and can be improved slightly using past information.

The paper develops a technique to analyze the discrete or limited independent‐variable model. Testing with Chinese stock market data provides some insights into the characteristics of emerging markets.

The purpose of this paper is to portray the valuation of financial investments as mental time travel.

In a series of thought investments, $1 invested in an investment fund is mentally projected forward in time and then discounted back to the present – with no objective time passing. The thought investments feature symmetric valuation (in which discount rates exactly match projection rates) and asymmetric valuation (in which discount rates and projection rates happen to differ). They show how asymmetric valuation can result in differences between the current personal value and market value of an investment and, by way of real-world illustration, between a closed-end investment fund's net asset value and its market value. The authors explore possible reasons for asymmetric valuation.

Thought investments illustrating mental time travel can be used to help understand both financial investment valuation generally and, more specifically, established explanations of the closed-end investment fund puzzle. The authors show how different expectations, different perceptions of time and risk and different risk and time preferences might help determine value.

There are vast literatures on prospection, discounting and future-orientated or intertemporal decision-making. The authors’ innovation is to illustrate how these mental activities might combine to facilitate financial investment valuation. In particular, the authors show that a low personal discount rate could be a consequence of a shortened perception of future time and vice versa.

The purpose of this paper is to investigate linkages between households’ expectations and credit markets in the housing crisis.

In the Markov-switching framework, the sample period is classified into high- and low-impact regimes based on impacts of expectations on default rates, and the good-time-to-buy (GTTB) index is chosen to proxy for expectations toward the housing-market dynamics.

The results suggest that in high-impact regimes, optimistic expectations are substantially associated with lower defaults for all default rates analyzed, and second mortgage defaults are more sensitive to households’ expectations than first mortgage defaults. In low-impact regimes, the GTTB index significantly influences composite and first-mortgage default rates, but its impact is insignificant for second mortgage and bankcard default rates.

The results provide compelling evidence that households’ expectations play more important roles in credit markets in turmoil periods.