The impact of UK household overconfidence in public information on house prices. Issue 4 (1st October 2020)

• Record Type: Journal Article
• Authors: Hwang, Soosung; Cho, Youngha; Shin, Jinho
• Is Part Of: Journal of property research. Volume 37:Issue 4(2020)
• Page Start: 360
• Page End: 389
• Publication Date: 2020-10-01
• Subjects: Overconfidence -- public signals -- households -- house Prices -- Bayesian updating; Real estate business -- Great Britain -- Periodicals; Land use -- Great Britain -- Periodicals; 333.3
• DOI: 10.1080/09599916.2020.1790631
• Languages: English
• ISSNs: 0959-9916

Abstract

ABSTRACT: We investigate if house prices are affected by the overconfidence of households who predict house prices using imperfect public information about economic outlook. For this purpose, we develop a new measure of household overconfidence in the Bayesian framework. For the three variables we test – changes in consumption, stock returns, and changes in human capital, we find that UK households were overconfident about the signals of consumption regardless of regions. However, households in London were overconfident about the signals of stock markets whereas those remote from London were overconfident about the signals of human capital. The results of household overconfidence appear positive in the UK housing market for our sample period from 1980 to 2018, in particular, 0.5% per quarter in London.