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Real estate prices: An international study of seasonality's sentiment effect

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  • Kaplanski, Guy
  • Levy, Haim

Abstract

The current study shows that real estate prices in several countries reveal a significant and persistent seasonality, where the highest rates of return are obtained in the spring and early summer, and the lowest rates of return are obtained in the fall. This seasonality is explained by a joint effect of the change in the number of daylight hours and the latitude of the area zone under consideration. Notably, latitude affects real estate prices above and beyond the effect of the change in the number of daylight hours, which by itself is a function of latitude. This joint effect is robust to the two explanations for seasonality given in the literature: the Matching Theory and the Bargaining Power Hypothesis, as well as to several macroeconomic variables. The effect also conforms to the well-known Seasonal Affective Disorder (SAD), which has been found in other studies to affect people's health, their risk attitude, and consequently their risk perception and investment decisions which, in turn, affect asset prices.

Suggested Citation

  • Kaplanski, Guy & Levy, Haim, 2012. "Real estate prices: An international study of seasonality's sentiment effect," Journal of Empirical Finance, Elsevier, vol. 19(1), pages 123-146.
  • Handle: RePEc:eee:empfin:v:19:y:2012:i:1:p:123-146
    DOI: 10.1016/j.jempfin.2011.11.004
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    Cited by:

    1. Georgios Bampinas & Stilianos Fountas & Theodore Panagiotidis, 2016. "The day-of-the-week effect is weak: Evidence from the European real estate sector," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 40(3), pages 549-567, July.
    2. Shangkari V. Anusakumar & Ruhani Ali & Hooy Chee Wooi, 2017. "The Effect of Investor Sentiment on Stock Returns: Insight from Emerging Asian Markets," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 13(1), pages 159-178.
    3. Guy Kaplanski & Haim Levy, 2017. "Seasonality in Perceived Risk: A Sentiment Effect," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-21, March.
    4. Selcuk, Cemil, 2014. "Seasonal cycles in a model of the housing market," Economics Letters, Elsevier, vol. 123(2), pages 195-199.
    5. Zhou, Zhengyi, 2018. "Housing market sentiment and intervention effectiveness: Evidence from China," Emerging Markets Review, Elsevier, vol. 35(C), pages 91-110.
    6. Steven D. Dolvin & Stephanie A. Fernhaber, 2014. "Seasonal Affective Disorder and IPO underpricing: implications for young firms," Venture Capital, Taylor & Francis Journals, vol. 16(1), pages 51-68, January.
    7. Tantisantiwong, Nongnuch & Halari, Anwar & Helliar, Christine & Power, David, 2018. "East meets West: When the Islamic and Gregorian calendars coincide," The British Accounting Review, Elsevier, vol. 50(4), pages 402-424.

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    More about this item

    Keywords

    Market sentiment; Real estate prices; Prices' seasonality; Behavioral economics;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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