||This dissertation contains two essays on the behavioral research in real estate: anchoring bias and disposition effect.
Anchoring Bias from the Buy-side in the Real Estate Market
We examine the existence and potential influences of anchoring bias within the real estate market by evaluating evidence and a priori arguments on the effects of investor sentiment on willingness to pay among homebuyers. Based upon a unique dataset which provides the complete histories of transactions in the real estate market, we investigate whether market participants can see through the bias; that is, we examine whether such homebuyers are actually likely to fall into the anchoring trap. Our findings reveal that the anchoring phenomenon prevails regardless of homebuyer's gender. Whilst a comparison between different kinds of homebuyers and geographical regions also reveals that homebuyers faced with higher systemic uncertainty and out-of-state housing transactions exhibit higher levels of anchoring; the heuristic thinking biased willingness to pay on the part of investors gives rise to the deviations from reasonable and actual housing values.
The Comprehensive Disposition Effect: Evidence from the Real Estate Market
This paper examines whether real estate investors exhibit the “disposition effect” to ride long on losses and realize gains too soon. Based upon a unique dataset which provides complete histories of repeat transactions in the real estate market, we document the existence of disposition effect among homeowners regardless of their gender. Further comparing with different kinds of homeowners and transaction characteristics reveal that while sophisticated homeowners are less susceptible to the disposition effect, those who dealt with smaller property sizes exhibit significantly stronger disposition effect.