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Understanding Rationality and Disagreement in House Price Expectations / Zigang Li, Stijn Van Nieuwerburgh, Wang Renxuan.
- Format:
- Book
- Author/Creator:
- Li, Zigang.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w31516.
- NBER working paper series no. w31516
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2023.
- Summary:
- Professional house price forecast data are consistent with a rational model where agents must learn about the parameters of the house price growth process and the underlying state of the housing market. Slow learning about the long-run mean can generate forecast bias, a response of forecasts to lagged realizations, sluggish response of forecasts to contemporaneous realizations, and over-reaction to forecast revisions. Introducing behavioral biases, either over-confidence or diagnostic expectations, helps the model further improve its predictions for short-horizon over-reaction and dispersion. Using panel data for a cross-section of forecasters and a term structure of forecasts are important for generating these results.
- Notes:
- Print version record
- July 2023.
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