Outshine to Outbid: Weather-Induced Sentiment and the Housing Mark

THE SPEAKER

Prof. Maggie Hu is currently an Assistant Professor of Real Estate and Finance at The Chinese University of Hong Kong (CUHK), jointly appointed by the School of Hotel and Tourism Management & Department of Finance. Her main research interests include real estate economics, banking and corporate finance. Her research papers have been presented at several international finance and real estate conferences, and published in top finance and real estate journals such as Journal of Financial and Quantitative Analysis and Real Estate Economics. She received both her PhD in Finance in 2013 and Bachelor of Engineering Degree from National University of Singapore in 2008. Prior to joining CUHK in 2016, she worked at University of New South Wales (UNSW), Australia for three years.

ABSTRACT

This paper examines how sentiment affects homebuyers’ decisions in housing transactions, focusing on auction sales. Utilizing housing transaction data in Sydney from 2000 to 2014, we find that transaction prices are significantly higher for auction sales compared to private sales, consistent with the notion of ‘winner’s curse’. Further, employing four sentiment proxies, including three weather-based sentiment proxies and a survey-based sentiment index, we show that higher sentiment is associated with higher transaction price, especially in auction sales. Sentiment boosts auction sale price particularly when the housing market is in boom, or the purpose of the property purchase is for investment. Our result is robust to using national sport events as sentiment shocks, selection bias, and participation constraints. Overall, our evidence suggests that sentiment affects homebuyers’ housing market decisions.