Loss aversion and anchoring in commercial real estate pricing: Empirical evidence and price index implications
Loss aversion behavior plays a major role in the pricing of commercial properties, and it varies both across the type of market participants and across the cycle. We find that sophisticated and more experienced investors are at least as loss averse as their counterparts and that loss aversion operat...
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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Wiley Blackwell
2013
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| Online Access: | http://hdl.handle.net/1721.1/77150 https://orcid.org/0000-0003-2865-9475 https://orcid.org/0000-0002-1024-7555 |
| _version_ | 1826203226769195008 |
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| author | Bokhari, Sheharyar Geltner, David M. |
| author2 | Massachusetts Institute of Technology. Center for Real Estate |
| author_facet | Massachusetts Institute of Technology. Center for Real Estate Bokhari, Sheharyar Geltner, David M. |
| author_sort | Bokhari, Sheharyar |
| collection | MIT |
| description | Loss aversion behavior plays a major role in the pricing of commercial properties, and it varies both across the type of market participants and across the cycle. We find that sophisticated and more experienced investors are at least as loss averse as their counterparts and that loss aversion operated most strongly during the cycle peak in 2007. We also document a possible anchoring effect of the asking price in influencing buyer valuation and subsequent transaction price. We demonstrate the importance of behavioral phenomena in constructing hedonic price indices, and we find that the impact of loss aversion is attenuated at the aggregate market level. This suggests that the pricing and volume cycle during 2001–2009 was little affected by loss aversion. |
| first_indexed | 2024-09-23T12:33:37Z |
| format | Article |
| id | mit-1721.1/77150 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T12:33:37Z |
| publishDate | 2013 |
| publisher | Wiley Blackwell |
| record_format | dspace |
| spelling | mit-1721.1/771502022-09-28T08:34:52Z Loss aversion and anchoring in commercial real estate pricing: Empirical evidence and price index implications Bokhari, Sheharyar Geltner, David M. Massachusetts Institute of Technology. Center for Real Estate Bokhari, Sheharyar Geltner, David M. Loss aversion behavior plays a major role in the pricing of commercial properties, and it varies both across the type of market participants and across the cycle. We find that sophisticated and more experienced investors are at least as loss averse as their counterparts and that loss aversion operated most strongly during the cycle peak in 2007. We also document a possible anchoring effect of the asking price in influencing buyer valuation and subsequent transaction price. We demonstrate the importance of behavioral phenomena in constructing hedonic price indices, and we find that the impact of loss aversion is attenuated at the aggregate market level. This suggests that the pricing and volume cycle during 2001–2009 was little affected by loss aversion. Real Capital Analytics (Firm) Real Estate Research Institute 2013-02-15T19:02:39Z 2013-02-15T19:02:39Z 2011-06 Article http://purl.org/eprint/type/JournalArticle 1080-8620 1540-6229 http://hdl.handle.net/1721.1/77150 Bokhari, Sheharyar, and David Geltner. “Loss Aversion and Anchoring in Commercial Real Estate Pricing: Empirical Evidence and Price Index Implications.” Real Estate Economics 39.4 (2011): 635–670. https://orcid.org/0000-0003-2865-9475 https://orcid.org/0000-0002-1024-7555 en_US http://dx.doi.org/10.1111/j.1540-6229.2011.00308.x Real Estate Economics Creative Commons Attribution-Noncommercial-Share Alike 3.0 http://creativecommons.org/licenses/by-nc-sa/3.0/ application/pdf Wiley Blackwell SSRN |
| spellingShingle | Bokhari, Sheharyar Geltner, David M. Loss aversion and anchoring in commercial real estate pricing: Empirical evidence and price index implications |
| title | Loss aversion and anchoring in commercial real estate pricing: Empirical evidence and price index implications |
| title_full | Loss aversion and anchoring in commercial real estate pricing: Empirical evidence and price index implications |
| title_fullStr | Loss aversion and anchoring in commercial real estate pricing: Empirical evidence and price index implications |
| title_full_unstemmed | Loss aversion and anchoring in commercial real estate pricing: Empirical evidence and price index implications |
| title_short | Loss aversion and anchoring in commercial real estate pricing: Empirical evidence and price index implications |
| title_sort | loss aversion and anchoring in commercial real estate pricing empirical evidence and price index implications |
| url | http://hdl.handle.net/1721.1/77150 https://orcid.org/0000-0003-2865-9475 https://orcid.org/0000-0002-1024-7555 |
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