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A Metropolitan Analysis of Investor Herding and House Price Bubbles

Author

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  • Matthew Pollock

Abstract

This study examines the connection between investor herding and house price bubbles in US metropolitan markets. Contrary to widely accepted theory on herding as a prime motivator for price bubbles, limited evidence is found to support this proposition. Rather, there is empirical support to suggest that price bubbles, proxied by excess returns, are in fact the motivator for investor herding. There are substantial time delays in the mechanism which are particularly relevant for discussions of market efficiency and persistence in behaviour. Furthermore, there is significant evidence of a relationship between reverse herding and price bubbles that is supported by a consideration of market structure and access to private information. The idiosyncratic impacts of price volatility on market dynamics are also included with a focus on constructing a leading indicator. Finally, the study assesses the relative impacts of local and national determinants on the extent of herding and price bubbles.

Suggested Citation

  • Matthew Pollock, 2023. "A Metropolitan Analysis of Investor Herding and House Price Bubbles," ERES eres2023_187, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2023_187
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2023-187
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    More about this item

    Keywords

    Bubbles; Herding; housing;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

    NEP fields

    This paper has been announced in the following NEP Reports:

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