Anchoring and housing choice: Results of a natural policy experiment

Arbel, Yuval; Ben‐Shahar, Danny; Gabriel, Stuart A.

doi:10.1016/j.regsciurbeco.2014.07.004

Cited by 24 publications

(7 citation statements)

References 45 publications

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“…This issue’s shift brings to fore the potential biases of the city stakeholders, decision makers and brokers. Urban participants may tend to rely on judgmental heuristics, leading to framing (Arbel et al ., 2014) or anchoring effects (Bao and Meng, 2017), such as the overly well-known “location, location, location” moto to estimate buildings’ global quality. For instance, it has been shown that the availability bias tends to reinforce investments in places where information is readily available (Adair et al ., 1994).…”

Section: Literature Reviewmentioning

confidence: 99%

Is quality central? Perceived quality, monocentricity, and financial assumptions

Andriot,

Larceneux,

Simon

2024

JERER

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PurposeIn this article, the aim is to document the divergences/convergences between the market perceptions of quality and the financial estimations for office buildings relative to the notion of centrality and the distance to the central business district (CBD).Design/methodology/approachBased on a hierarchical approach that decomposes and estimates the perceived quality of buildings from the stakeholders’ perspectives, we study the geographies of perceived quality measures in the Greater Paris Metropolis and compare them to the financial geography.FindingsThe perceived location quality decreases with distance from the CBD whereas judgments on the built structure and the workplace do not, exhibiting a ring-shaped pattern. The gradient of the components of the perceived quality are heterogeneous, having positive, negative or null values. Appraisers tend only to consider the quality of location in their estimations.Originality/valueThis article raises the issue of fair spatial judgments by appraisers and the financial market. Monocentricity is not the rule in the market perceptions of quality. It suggests that financial estimates are strongly biased, with mental representation of centrality as a judgmental heuristic.

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Section: Literature Reviewmentioning

confidence: 99%

Is quality central? Perceived quality, monocentricity, and financial assumptions

Andriot,

Larceneux,

Simon

2024

JERER

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“…In terms of residential property auctions, Bucchianeri and Minson (2013) indicated that a higher listing price (anchor) is associated with a higher transaction price. An anchoring bias even exists in public housing purchases (Arbel et al 2014).…”

Section: Literature Reviewmentioning

confidence: 99%

Homebuyer Purchase Decisions: Are They Anchoring to Appraisal Values or Market Prices?

Cheung

Yiu

Guan

2022

JRFM

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Price discovery is an important research topic in real estate due to the heterogeneous nature of housing attributes and relatively thin trading activities compared to other assets. In Commonwealth countries, including New Zealand, governments usually conduct periodic appraisals for the purpose of collecting rates and levies. Such official appraisal values of properties, also known as capital values (CVs), are considered a price anchor for market participants in their negotiation processes. Real estate agents often use these appraisal values to advertise their listings and negotiate transaction prices. In this study, we aim to make an initial attempt to study the influence of CV on market prices using Granger causality tests and a hedonic pricing model. To test the lead-lag relationships, three million housing transactions from 1990 to 2020 in New Zealand are used to construct the capital values (CVs) and transacted prices (TPs) indices in both primary and secondary housing markets. The Granger causality test suggests that the indices of TPs and CVs have a bi-directional lead-lag relationship in the secondary housing market, whereas the relationship does not follow in the primary market where the information on CVs is unavailable. The results imply the existence of a CV anchoring effect. Such anchoring effects are also contingent on the timeliness of price anchors, which is consistent with the availability heuristic from behavioural economics.

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“…George and Hwang (2004) observe that investors use the 52-week high as an "anchor" against which they value stocks. Baker et al (2012) show that the 52-week high price is a reference point for valuing corporations in mergers and acquisitions.Incidentally, anchoring exists not just in financial markets but also in many other markets. 3 That leads to our last question.…”

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confidence: 99%

“…Exchange rates serve as anchors (Edwards, 1992). Precedents in legal theory are nothing but anchors (e.g., Diamond et al, 2011). In labor economics, the concept of career anchors, first explored by Schein and Maanen (1990), is becoming a fruitful field of study.…”

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confidence: 99%

Nominal Stock Price Anchors: A Global Phenomenon?

et al. 2019

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a b s t r a c t Weld et al. (2009) find that the average nominal U.S. stock price has been approximately $25 since the Great Depression. They report that this "nominal price fixation is primarily a U.S. or North American phenomenon." Using a larger data set from 38 countries, we show that this nominal price fixation is a global phenomenon. We exploit the introduction of the euro in 1999 to show that stock splits maintain these nominal stock price anchors. Generally, firms in countries with larger drops in nominal prices had fewer stock splits after stock prices were displayed in euros.Anchoring is a cognitive bias that describes the common human tendency to rely excessively on the first piece of information offered (the "anchor") when making decisions. Tversky and Kahneman (1974) describe an experiment in which a group of students, given five seconds to evaluate the product of eight numbers, estimated that 1X2X3X4X5X6X7X8 was 512 but 8X7X6X5X4X3X2X1 was 2250. The first digit, the anchor, mattered. 1 Anchors also matter in finance. In an intriguing paper, Weld et al. (2009) find that the average nominal price for a share of stock on the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX) has been approximately $25 since the Great Depression. The price has not even kept pace with the rate of inflation. However, they find that 16 other countries did not share this peculiar trait. Hence, they conclude that the nominal price fixation is primarily a U.S. or North American phenomenon.The goal of this paper is to revisit their last conclusion. Because anchoring is such a common human trait, we are skeptical that the United States is the only country whose stock markets exhibit this phenomenon. To find out whether the nominal price fixation is indeed a U.S. phenomenon, we extend the analysis by Weld et al. (2009) to international markets using a larger data set. We collect the nominal stock prices of firms, in both the local currency and the U.S. dollar, at the end of June in each year for 38 countries from 1981 to 2010.Five interesting, sometimes, surprising facts stand out in this panel. The first four are suggestive and the fifth is our main formal test. First, when we compute the mean or median level of stock prices in a country over the sample period, we observe a large variation between countries. The mean (median) of the nominal price level in Switzerland, for example, is $925 It is clear that a global anchor does not exist.Second, surprisingly, the median nominal stock price of all surviving firms in our sample remains remarkably flat and stable throughout the sample period, suggesting that nominal share prices are held roughly constant, although these firms generate positive returns on average. In fact, the median level of nominal stock prices in 2010 is remarkably similar to the median level of nominal stock prices 29 years earlier.Third, a firm's nominal stock price has a tendency to revert to the stock price level that it had when it first entered the panel. When we partition our sample fir...

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Anchoring and housing choice: Results of a natural policy experiment

Cited by 24 publications

References 45 publications

Is quality central? Perceived quality, monocentricity, and financial assumptions

Is quality central? Perceived quality, monocentricity, and financial assumptions

Homebuyer Purchase Decisions: Are They Anchoring to Appraisal Values or Market Prices?

Nominal Stock Price Anchors: A Global Phenomenon?

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