Asymmetric framing effects and market familiarity: experimental evidence from the real estate market

Levy, Deborah; Frethey‐Bentham, Catherine; Cheung, Ka Shing

doi:10.1080/09599916.2020.1713858

Cited by 18 publications

(22 citation statements)

References 49 publications

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“…The information asymmetry in the real estate market can be defined as the difference in the level of information, that is, as the discrepancy of information on immovable property, between the seller and the buyer [8,9]. That difference in the level of information can, on one hand, stem from the lack of liquidity in the market, and on the other hand also from the scarcity of knowledge of the dwelling's physical characteristics and quality [5,10]. Hence, there is an asymmetry in the real estate market that derives from the fact that the market is not efficient and perfect [8,9].…”

Section: Literature Reviewmentioning

confidence: 99%

“…According to this line of thought, the real estate professionals must be proactive, seeking to educate people on the dwelling's sustainability characteristics, contributing to the knowledge on sustainable housing, and helping to develop and implement more effective practices in information collection and communication. Information asymmetry exists in the real estate market and results from the familiarity of buyers and sellers with that market [5]. Thus, the authors understand that both a pessimistic and an optimistic perspective affect the individuals' perceptions of housing prices and their aversion to loss.…”

Section: Introductionmentioning

confidence: 99%

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Comparative Analysis of the Importance of Determining Factors in the Choice and Sale of Apartments

Santos

Tavares

et al. 2021

Sustainability

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The motivation to compare the importance that buyers and sellers give to the diverse characteristics of apartments is its pertinency to grasping the housing market. The objective of this article is to compare the determining factors in the choice and sale of apartments among the potential buyers and sellers. During a sale, the realtors exhibit the dwellings’ positive characteristics, the so-called amenities. The homebuyers must analyse the deal in a rational and well-weighed way, striving to know its characteristics to reduce the information asymmetry. The study focuses on two distinct samples, with the common goal of transacting housing. One of the samples is composed of individuals who are looking for apartments, and the other one of individuals who are selling apartments, both being collected in mainland Portugal. It was verified that there are statistically significant differences between buyers and sellers. Buyers give more importance to certain rooms and the inexistence of negative externalities near their future residence. Sellers emphasise positive externalities and parking spots. This study is expected to contribute to the increase in scientific knowledge on the housing market and to the decrease of the information asymmetry between sellers and buyers. Knowing the importance that buyers and sellers give to the main different factors in the Portuguese real estate market constitutes an advancement of knowledge in this area.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Comparative Analysis of the Importance of Determining Factors in the Choice and Sale of Apartments

Santos

Tavares

et al. 2021

Sustainability

View full text Add to dashboard Cite

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“…From a broader perspective, all real estate research is behavioural since it aims to explicate real estate decision-making (Diaz and Hansz, 2007). In the real estate context, recent developments in behavioural finance also incorporate behavioural aspects such as framing effects (Ewe et al , 2018; Levy et al , 2020) and familiarity bias (Seiler et al , 2013). Thus, the extent to which sentiment influences property investment decisions is part of a broader exploration of how these decisions are made.…”

Section: Literature Reviewmentioning

confidence: 99%

The effect of sentiment on commercial real estate returns: investor and occupier perspectives

Cheung

Lee

2021

JPIF

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PurposeReal estate is an asset that is traded in highly segmented, illiquid and informationally inefficient local markets. A short sale in real estate is almost infeasible and therefore impedes informed rational arbitrageurs to trade against mispricing. Thus, real estate returns are prone to sentiment-driven behaviours. Will the impacts on asset returns be identical for different types of sentiment?Design/methodology/approachThis study argues that not all sentiment effects are created equal. Using the bounds test of the autoregressive distributed lag (ARDL) models, this paper examines how occupier sentiment versus investor sentiment contributes to the short-run and long-run dynamics of commercial real estate returns in Australia.FindingsThe empirical evidence suggests that investor sentiment and occupier sentiment influence return asymmetrically after macroeconomic conditions are controlled for.Practical implicationsThe sectoral analysis further reveals that sector-specific sentiment plays a significant role in explaining commercial real estate returns. Furthermore, notable improvement is found in producing more accurate prediction in returns, given that measures of occupier and investor sentiment are appropriately specified in the forecast.Originality/valueThis study is novel in the sense that it acknowledges the impacts of occupiers' and investors' sentiment may be fundamentally different. The unique innovation and contribution of this study to behavioural finance literature are based on a new dataset from the Royal Institute of Chartered Surveyors which includes a survey-based measure of investor sentiment and occupier sentiment.

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“…Further, Mori et al (2010) reported that mortgage choices are affected by psychological and cultural factors with evidence suggesting that risk-averse people are willing to accommodate risk as mortgage rate fluctuates. Recently, Levy et al (2020) also examined the effect of framing and market familiarity on the residential property market and they reported that optimistic and pessimistic framing influence the perception of home buyers as they evaluate house prices.…”

Section: Theoretical Perspective To Property Investment Decision-makingmentioning

confidence: 99%

Property investment decision-making behaviour amidst market disruptions: an institutional perspective

Bolomope

Amidu

Filippova

et al. 2020

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PurposeDecision-making behaviour of property investors has been the focus of real estate research for decades. Yet, there is no consensus on a generally accepted behavioural model that suits all market conditions and investment peculiarities. While scholars have emphasized the significance of rational reasoning and cognitive influences on property investment decision-making preferences, gaps remain regarding the impacts of market disruptions on property investment decision-making behaviour. This paper, therefore, explores the institutional framework as a theoretical basis for understanding property investment decision-making behaviour amidst market disruptions.Design/methodology/approachThis paper reports a systematic review of pertinent theories that have explored decision-making behaviour. Commencing with an index search of high impact peer-reviewed journals, a snowball identification of relevant citations was also deployed to assemble theories from the field of psychology, sociology, economics and urban studies. Although a preliminary dataset of 82 papers with relevant decision-making theories was identified, the final dataset comprised 27 papers and 7 theories. The identified theories were reviewed accordingly.FindingsThe outcome of this study suggests that the institutional framework offers a robust approach to property investment decision-making amidst market disruptions, especially because it recognizes the dynamism in the investment environment and the roles of formal and informal rules that exist therein.Originality/valueThis study advances the current understanding of property investment decision-making behaviour by recognising the dynamism of the investment environment and how factors such as principles, laws, tradition and routines can lead to an established and legitimate standard of reasoning. By integrating both rational and cognitive attributes, the study provides a holistic perspective to property investors' decision-making behaviour in response to market disruptions.

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Asymmetric framing effects and market familiarity: experimental evidence from the real estate market

Cited by 18 publications

References 49 publications

Comparative Analysis of the Importance of Determining Factors in the Choice and Sale of Apartments

Comparative Analysis of the Importance of Determining Factors in the Choice and Sale of Apartments

The effect of sentiment on commercial real estate returns: investor and occupier perspectives

Property investment decision-making behaviour amidst market disruptions: an institutional perspective

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