Real estate investment has recently been advancing rapidly in both volume and complexity. A sound understanding of behavioral issues in this sector benefits all stakeholders, such as investors, regulators and local residents. We focus on one of the most robust behavioral anomalies in business and finance research: overconfidence. Overconfidence significantly influences financial decision and investment performance. However, theoretical and empirical studies are lacking in real estate sector. We conduct a critical review of the overconfidence literature to bridge this gap, identify future research directions for the study of overconfidence in real estate markets, and suggest strategies to handle technical issues, such as the robustness of overconfidence measurement and data availability. Findings provide useful guidelines for researchers and practitioners to design and implement overconfidence studies in real estate research.
The housing wealth effect manifests as a positive relationship between consumption and perceived housing wealth. When the perceived value of a property rises, homeowners may feel more comfortable and secure about their wealth, causing them to spend more. This study adopts a behavioural approach to verify if this relationship holds true for residential energy consumption. An analytical framework is proposed to study the relationship between housing wealth and energy consumption at both the market and the individual level. We find evidence of significant association between housing wealth and energy consumption by using data between 1995 and 2016 from the UK. As the perception of housing value increases, UK residents tend to increase their energy consumption. Our models also consider psychological biases in energy consumption behaviours, such as market sentiment in the macro-level analysis and framing effect in the micro-level investigation. Our findings shed light on the behavioural aspects of housing wealth effect on residential energy consumption and demonstrate the potential of using behavioural interventions to encourage energy conservation activities. These findings are helpful in designing and implementing energy consumption policies that can strike a balance between social justice and economic efficiency.
Overconfidence is one of the most robust behavioral anomalies in financial markets. By attributing investment gains to their ability, investors become overconfident and trade aggressively in subsequent periods. Evidence from stock markets shows that overconfidence leads to excessive trading and, subsequently, inferior investment performance. However, studies on overconfidence effect are lacking in the real estate sector, which is particularly true for Asia Pacific real estate investment trust (REIT) markets. Thus, this study examines the overconfidence effect in six Asia Pacific REIT markets, namely, Australia, Hong Kong, Japan, Singapore, South Korea, and Taiwan. The study finds that the overconfidence effect is more conspicuous during market boom periods or in inefficient market conditions. In addition, simulation analysis demonstrates that overconfidence could lead to rather large volumes of excessive trading activities in certain markets. Findings are robust across the alternative measures of control variables. Moreover, the policy implications of the research are also discussed.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.