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The Impact of Exogenous Shocks on House Prices: the Case of the Volkswagen Emissions Scandal

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  • Heiko Kirchhain

    (EBS University of Business and Law)

  • Jan Mutl

    (EBS University of Business and Law)

  • Joachim Zietz

    (EBS University of Business and Law)

Abstract

This study analyzes to what extent the announcement on 9/18/2015 of the VW diesel emissions scandal affected house prices in the vicinity of Chattanooga, TN, the location of the only VW production plant in the United States at that time. We examine the impact of the announcement with house transactions data for the 3 years from 2014 to 2016. We explore a number of alternative methods, including a permutation test, to tie down causation. Our results indicate that the brunt of the negative impact occurred 61 to 90 days after the announcement, with no statistically significant negative effects after 90 days. Although the average price discount for the study area is modest at about 3% to 4.5%, the effect tends to be significantly larger for locations closer to the VW plant. However, geographical distance has a distinctly non-linear influence on the price discount.

Suggested Citation

  • Heiko Kirchhain & Jan Mutl & Joachim Zietz, 2020. "The Impact of Exogenous Shocks on House Prices: the Case of the Volkswagen Emissions Scandal," The Journal of Real Estate Finance and Economics, Springer, vol. 60(4), pages 587-610, May.
    • Handle: RePEc:kap:jrefec:v:60:y:2020:i:4:d:10.1007_s11146-019-09700-4
    DOI: 10.1007/s11146-019-09700-4
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    1. Kirchhain, Heiko & Mutl, Jan & Zietz, Joachim, 2021. "Spillover effects of company news across real estate markets and causal impact analysis," Journal of Housing Economics, Elsevier, vol. 54(C).

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    More about this item

    Keywords

    House prices; Announcement effect; VW emission scandal; Permutation test;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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