Has SARS Infected the Property Market? Evidence from Hong Kong
AbstractThis paper uses the SARS epidemic as a natural experiment to provide new evidence on how housing markets react to adverse shocks, in terms of both prices and transaction volume. I employ a weekly panel data set on 44 large-scale housing complexes in Hong Kong. To isolate the impact of this unanticipated event from underlying time trends, I exploit cross-sectional variation in SARS infection risk due to pre-SARS building characteristics. The impact of SARS is measured by an estate-specific government SARS-list indicator, a count of newspaper stories connecting SARS to each estate, an estate-level SARS infection rate and a predicted SARS infection risk variable, in addition to a Hong Kong-wide-start-of-epidemic indicator. I find a price drop of 1-2 percent in response to SARS, which is consistent with the standard asset pricing model in the event of a severe but transitory averse shock; no signs of overreaction in terms of prices are found. I also find significant volume decreases of 20-40 percent, which were persistent after the SARS infection rate declined, suggesting that SARS led to both increases in search costs and ¡°fishing¡± behavior on the part of sellers. Volume fell most sharply in buildings that had experienced the least severe price drops in the preceding 7 years, which lends some support for a loss aversion model.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 11.
Date of creation: Apr 2004
Date of revision:
Contact details of provider:
Postal: Firestone Library, Princeton, New Jersey 08544-2098
Phone: 609 258-4041
Fax: 609 258-2907
Web page: http://www.irs.princeton.edu/
More information through EDIRC
Find related papers by JEL classification:
- R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-24 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barrow, Lisa & Rouse, Cecilia Elena, 2004.
"Using market valuation to assess public school spending,"
Journal of Public Economics,
Elsevier, vol. 88(9-10), pages 1747-1769, August.
- Lisa Barrow & Cecilia Elena Rouse, 2002. "Using Market Valuation to Assess Public School Spending," NBER Working Papers 9054, National Bureau of Economic Research, Inc.
- Jeremy C. Stein, 1993.
"Prices and Trading Volume in the Housing Market: A Model with Downpayment Effects,"
NBER Working Papers
4373, National Bureau of Economic Research, Inc.
- Stein, Jeremy C, 1995. "Prices and Trading Volume in the Housing Market: A Model with Down-Payment Effects," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 379-406, May.
- Jin-Tan Liu & James K. Hammitt & Jung-Der Wang & Meng-Wen Tsou, 2003.
"Valuation of the Risk of SARS in Taiwan,"
NBER Working Papers
10011, National Bureau of Economic Research, Inc.
- Terrance R. Skantz & Thomas H. Strickland, 1987. "House Prices and a Flood Event: An Empirical Investigation of Market Efficiency," Journal of Real Estate Research, American Real Estate Society, vol. 2(2), pages 75-83.
- Gyourko, Joseph & Tracy, Joseph, 1991. "The Structure of Local Public Finance and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 774-806, August.
- Amos Tversky & Daniel Kahneman, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Levine's Working Paper Archive
7656, David K. Levine.
- Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
- Francois Ortalo-Magne & Sven Rady, 1998.
"Housing Market Fluctuations in a Life-Cycle Economy with Credit Constraints,"
- Sven Rady, 1998. "Housing Market Fluctuations in a Life-Cycle Economy with Credit Constraints," FMG Discussion Papers dp296, Financial Markets Group.
- Genesove, David & Mayer, Christopher J, 1997.
"Equity and Time to Sale in the Real Estate Market,"
American Economic Review,
American Economic Association, vol. 87(3), pages 255-69, June.
- David Genesove & Christopher J. Mayer, 1993. "Equity and time to sale in the real estate market," Working Papers 93-6, Federal Reserve Bank of Boston.
- Genesove, D. & Mayer, C.J., 1994. "Equity and Time to Sale in the Real Estate Market," Working papers 94-02, Massachusetts Institute of Technology (MIT), Department of Economics.
- David Genesove & Christopher J. Mayer, 1994. "Equity and Time to Sale in the Real Estate Market," NBER Working Papers 4861, National Bureau of Economic Research, Inc.
- Allen Lynch & David Rasmussen, 2001. "Measuring the impact of crime on house prices," Applied Economics, Taylor and Francis Journals, vol. 33(15), pages 1981-1989.
- David Genesove & Christopher Mayer, 2001.
"Loss Aversion And Seller Behavior: Evidence From The Housing Market,"
The Quarterly Journal of Economics,
MIT Press, vol. 116(4), pages 1233-1260, November.
- Genesove, David & Mayer, Christopher, 2001. "Loss Aversion and Seller Behaviour: Evidence from the Housing Market," CEPR Discussion Papers 2813, C.E.P.R. Discussion Papers.
- David Genesove & Christopher Mayer, . "Loss Aversion and Seller Behavior: Evidence from the Housing Market," Zell/Lurie Center Working Papers 323, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
- David Genesove & Christopher Mayer, 2001. "Loss Aversion and Seller Behavior: Evidence from the Housing Market," NBER Working Papers 8143, National Bureau of Economic Research, Inc.
- Ted Gayer & James T. Hamilton & W. Kip Viscusi, 2002. "The Market Value of Reducing Cancer Risk: Hedonic Housing Prices with Changing Information," Southern Economic Journal, Southern Economic Association, vol. 69(2), pages 266-289, October.
- Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
- Case, Karl E & Shiller, Robert J, 1989.
"The Efficiency of the Market for Single-Family Homes,"
American Economic Review,
American Economic Association, vol. 79(1), pages 125-37, March.
- Karl E. Case & Robert J. Shiller, 1989. "The Efficiency of the Market for Single-Family Homes," NBER Working Papers 2506, National Bureau of Economic Research, Inc.
- James C. Murdoch & Harinder Singh & Mark Thayer, 1993. "The Impact of Natural Hazards on Housing Values: The Loma Prieta Earthquake," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 21(2), pages 167-184.
- John Krainer, 1999. "Real estate liquidity," Economic Review, Federal Reserve Bank of San Francisco, pages 14-26.
- Kenneth Y. Chay & Michael Greenstone, 1998.
"Does Air Quality Matter? Evidence from the Housing Market,"
NBER Working Papers
6826, National Bureau of Economic Research, Inc.
- Kenneth Y. Chay & Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
- James P. Smith, 1999. "Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 145-166, Spring.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Long).
If references are entirely missing, you can add them using this form.