Study of Herding Behavior on China's Real Estate Market Price Fluctuations

Wang, Yuanhao

doi:10.3923/itj.2013.7926.7929

Cited by 4 publications

(4 citation statements)

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“…Lan (2014) finds that Chinese residential housing markets tend to herd before a financial crisis. Within the period of the post-financial crisis, there have been countless researchers trying to find a way to better the traditional methods in predicting market fluctuations (Wang, 2013).…”

Section: Introductionmentioning

confidence: 99%

First-home buyers and herding behavior in Surabaya, Indonesia

Susanto

Anastasia

2019

IJHMA

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Purpose This study aims to determine the causality of herding which was traced down to social and normative influences from first-home buyers represented by undergraduate students. Design/methodology/approach The Perception Alignment Hypothesis was used in this experimental research, and was conducted on a sample of 125 undergraduates studying finance representing first-home buyers. The experiment provides the subjects property brochures in Surabaya to appraise a value that they see fit for purchase. The subjects were given both social- and normative-induced treatments separately using information cascade, and their valuation shifts were recorded. Their valuations were then divided into three sections under the treatment groups, consisting of initial, “social’ and “normative’ valuations. Findings In contrast to previous findings, the results showed that first-home buyers succumbed to both social and normative influences, causing them to herd. Further analysis of the credibility of information was conducted and it showed that the undergraduates were only prone to social influence, whereas other aspects regarding normative influences must be further researched. Practical implications The decline of homeownership on a global scale is concerning, especially when 60% of the market represents young adults under the age of 35. This implies that both the government and property developers may need to enact strict measures to regulate property purchases. Originality/value This is the first experimental study on herding of Surabaya, Indonesia, mainly focusing on human behavior and information cascade. Thus, this study could be a viable reflection to future policies in Indonesia being made to answer actual demands in the residential market.

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Section: Introductionmentioning

confidence: 99%

First-home buyers and herding behavior in Surabaya, Indonesia

Susanto

Anastasia

2019

IJHMA

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“…With respect to studies about herding behavior in the stock markets, our study is necessary in the light of limited studies on industry specific herd behavior in China and the conflicting evidence of their outcome [ 54 ] and [ 55 ] as well as the differences in the variables used in constructing and testing models [ 31 ]. To the best of our knowledge, the most recent effort at studying herding behavior in a specific industry in China are by [ 56 ] and [ 57 ] who focused on herding behavior in the housing industry in China. In both cases they employ different set of methodologies (least squares method and quantile regression method) which are totally different from those employed in this study.…”

Section: Introductionmentioning

confidence: 99%

The effect of herd formation among healthcare investors on health sector growth in China

Zhou

Antwi

Wang

et al. 2016

Int J Equity Health

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BackgroundChina has become the world‘s second largest healthcare market based on a recent report by the World Health Organization. Eventhough China achieved universal health insurance coverage in 2011, representing the largest expansion of insurance coverage in human history achieved; health inequality remains endemic in China. Lessons from the effect of market crisis on health equity in Europe and other places has reignited interest in exploring the potential healthcare market aberrations that can trigger distributive injustice in healthcare resource allocation among China’s provinces. Recently, many healthcare investors in China have become more concerned about capital preservation, and are responding by abandoning long term investments strategies in healthcare. This investment withdrawal en mass is perceived to be influenced by herding tendencies and can trigger or consolidate endemic health inequality.MethodsOur study simultaneously employs four testing models (two state spaced models and two return dispersion models) to establish the existence of procyclical (herding) behavior among the stocks and its health equity implications. These are applied to a large set of data to compare and contrast results of herd formation among investors in fourteen healthcare sectors in China.ResultsThe study reveals that apart from the cross sectional standard deviation (CSSD) model, the remaining two models and our augmented state space model yields significant evidence of herding in all subsectors of the healthcare market. We also find that the herding effect is more prominent during down movements of the market.ConclusionHerding behavior may lead to contemporaneous loss of investor confidence and capital withdrawal and thereby deprive the healthcare sector of the much needed capital for expansion. Thus there may be obvious delay in efforts to bridge the gap in access to healthcare facilities, medical support services, medical supplies, pharmaceuticals, biotechnology, diagnostic substances, medical laboratory and advanced medical equipment across China. Moreover, a potential crash in the healthcare market is possible in the healthcare sector as a result of persistent herding tendencies among investors and that may have more damaging consequences for health inequality in China.

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“…Yang et al (2020) studied the existence of herd behavior in the real estate market in the USA, finding that investors prefer to follow the market consensus instead of imitating the actions of investors who are close to them because, according to the authors the latter is perceived as riskier, considering the value of the investments in question. Wang (2013) also showed that real estate prices depend on group psychology and market behavior, concluding that herd behavior is present in property market prices' fluctuations. Susanto and Njo (2020) confirmed the existence of herd behavior in a study of first-home buyers in Indonesia.…”

Section: Behavioral Finance In Housing Investmentsmentioning

confidence: 94%

Heuristics and cognitive biases in the housing investment market

Cascão

Quelhas²,

Cunha³

2022

IJHMA

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Purpose This paper aims to analyze the heuristics and cognitive biases described by behavioral finance in the investment decision-making process of Portugal’s housing market. Design/methodology/approach In a first step, the authors applied an exploratory factor analysis (EFA) to assess the impact of heuristics and cognitive biases on investors’ decision-making. In a second step, the authors run a structural equation model (SEM) diagram path to assess if the sociodemographic characteristics of housing market investors determine the identified heuristics and if the heuristics condition the investors’ investment criteria. Findings Herd behavior and the heuristics of representativeness, availability and anchoring influence the housing market’s investors’ behavior in their decision-making process. Investors with above-average income show higher levels of overconfidence. Investors showing higher levels of overconfidence also tend to be more sensitive to the house price under analysis for investment. Women tend to show higher levels of the availability and anchoring heuristic. In turn, housing market investors showing higher levels of availability and anchoring heuristic tend to be more sensitive to the price and location of the house under analysis for investment. Research limitations/implications The explained variance of the EFA is below 50%, and the root mean square of approximation of the SEM is above the threshold of 0.05. These indicators are evidence of the models’ fragility. Practical implications Governments and regulators can better prevent real estate bubbles if they monitor behavioral biases and heuristics of housing investors together with quantitative indicators. Realtors can profit from adapting their marketing strategy and commercial communication to investors of sociodemographic groups more prone to a specific type of heuristics. Originality/value To the best of the authors’ knowledge, this is the first study that combines the contributions of behavioral finance with Portugal’s housing investment market and the first study connecting heuristics to investment criteria.

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Study of Herding Behavior on China's Real Estate Market Price Fluctuations

Cited by 4 publications

References 0 publications

First-home buyers and herding behavior in Surabaya, Indonesia

First-home buyers and herding behavior in Surabaya, Indonesia

The effect of herd formation among healthcare investors on health sector growth in China

Heuristics and cognitive biases in the housing investment market

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