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The role of buy-side anchoring bias: Evidence from the real estate market

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  • Chang, Chuang-Chang
  • Chao, Ching-Hsiang
  • Yeh, Jin-Huei

Abstract

We examine anchoring bias within the real estate market by evaluating evidence and a priori arguments on the effects of investor sentiment on willingness-to-pay among homebuyers. Based upon a unique dataset which provides the complete histories of transactions in the real estate market, our findings reveal that the anchoring phenomenon prevails regardless of homebuyer's gender. Homebuyers faced with higher systemic uncertainty and out-of-state housing transactions exhibit higher levels of anchoring; the heuristic thinking biased on investors' willingness-to-pay gives rise to the deviations from reasonable housing values.

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  • Chang, Chuang-Chang & Chao, Ching-Hsiang & Yeh, Jin-Huei, 2016. "The role of buy-side anchoring bias: Evidence from the real estate market," Pacific-Basin Finance Journal, Elsevier, vol. 38(C), pages 34-58.
    • Handle: RePEc:eee:pacfin:v:38:y:2016:i:c:p:34-58
    DOI: 10.1016/j.pacfin.2016.02.008
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    2. Akshita Singh & Shailendra Kumar & Utkarsh Goel & Amar Johri, 2023. "Behavioural biases in real estate investment: a literature review and future research agenda," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-17, December.
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    5. MeiChi Huang, 2022. "Time‐varying impacts of expectations on housing markets across hot and cold phases," International Finance, Wiley Blackwell, vol. 25(2), pages 249-265, August.
    6. Lijie Shan & Shusai Wang & Linhai Wu & Fu-Sheng Tsai, 2019. "Cognitive Biases of Consumers’ Risk Perception of Foodborne Diseases in China: Examining Anchoring Effect," IJERPH, MDPI, vol. 16(13), pages 1-14, June.
    7. Ka Shing Cheung & Julian TszKin Chan & Sijie Li & Chung Yim Yiu, 2021. "Anchoring and Asymmetric Information in the Real Estate Market: A Machine Learning Approach," JRFM, MDPI, vol. 14(9), pages 1-22, September.
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