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Behavioral Real Estate

Paper Session

Friday, Jan. 5, 2018 12:30 PM - 2:15 PM

Loews Philadelphia, Washington B
Hosted By: American Real Estate and Urban Economics Association
  • Chair: Michael Seiler, College of William and Mary

How Do the CEO Political Leanings Affect REIT Business Decisions?

Paul Anglin
University of Guelph
Xiaoying Deng
Shanghai University of Finance and Economics
Yanmin Gao
City University of Hong Kong
Hua Sun
Iowa State University


Business decisions made by the real estate industry can have a profound effect on the well-being of people who live, work, or shop in these buildings. While these decisions may be informed by evidence, the available evidence is often incomplete, unrepresentative or otherwise less than ideal. Therefore, the personal opinions or judgments of senior executives can have an effect. In this paper, we study these effects in two parts: risk-taking and Corporate Social Responsibility (CSR) activities. Since political opinion is a relatively stable measure, which is also associated with preferences for risk and CSR, we examine how the political leanings of the CEO are related to these effects. Based on the data from 1999 to 2013, we find that Real Estate Investment Trusts (REITs) with Democrat-leaning CEOs tend to take more risks, as evidenced by higher levels of leverage, more capital expenditures and risky investments. We further find that politically active CEOs are more broadly engaged in different types of CSR activities.

Outshine to Outbid: Weather-induced Sentiments on Housing Market

Maggie Hu
Chinese University of Hong Kong
Adrian Lee
University of Technology Sydney


This paper examines how sentiments affect homebuyers’ decision in housing transactions, especially in auction sales. Utilizing housing transaction data in Sydney, we find that the transaction price is significantly higher for auction sale, consistent with winner’s curse. Further, employing four sentiment proxies including three weather-based sentiment proxies and a survey-based sentiment index, we show that positive sentiment boosts this auction premium more when the auction day has high sentiment. Sentiment boosts auction premium particularly more when housing market is in boom, or has high turnover. Our result is robust to using national sport events as sentiment shocks, selection bias and unobserved variable bias. Overall, our evidence suggests that sentiments affect homebuyers’ housing market decisions.

Contact High: The External Effects of Retail Marijuana Establishments on House Prices

James Conklin
University of Georgia
Moussa Diop
University of Wisconsin
Herman Li
California State University-Sacramento


Using publicly available data from the city of Denver and the state of Colorado, this study examines the effects of retail conversions (conversions from medical marijuana to retail marijuana stores) on neighboring house values in Denver, Colorado for the years 2013 and 2014. The time period was chosen to reflect a time before (2013) and after (2014) retail marijuana sales became legal in Colorado. Using a difference-in-differences approach, we compare houses that were in close proximity to a conversion (within 0.1 miles) to those that are farther away from a conversion. We find that after the law went into effect, single family residences close to a retail conversion increased in value by approximately 9% relative to houses that are located slightly farther away. We perform a battery of robustness checks and falsification tests to provide additional support for this finding. To our knowledge this is the first study to examine at a micro-level the highly localized effect of retail marijuana establishments on house prices and hope that it can contribute to the debate on retail marijuana laws.

Prostitution and House Prices: Evidence from Closing Brothels in the Netherlands

Rafael Ribas
University of Amsterdam
Erasmo Giambona
Syracuse University


We measure the externalities of prostitution by quantifying the discount that households require to live next to a brothel. In our tests, we exploit a unique feature of Amsterdam's Red Light District (RLD), area inside a perimeter naturally delimited by canals where private homes are located next to prostitution windows. Using a novel two-dimensional difference-in-discontinuity (DiD) estimator, we find that households require a discount as high as 24% on homes inside the RLD. We also find that this discount disappears when prostitution windows are forcibly closed by local authorities. By incorporating the exact coordinates of brothel closings, our empirical design allows us to establish a direct link between these closings and changes in price discontinuities. To estimate the economic impact on households outside the RLD, we look at the closings of all brothels in Utrecht (the fourth largest city in the Netherlands) in 2013. Households are found to have paid up to 12% of the value of their home to be some distance from prostitution. In both cities, the contraction of the paid-sex industry is also associated with a drastic reduction in crime rates. Overall, our findings suggest that the nuisances prostitution creates do more harm than good to residents.
William Hardin
Florida International University
Thomas Davidoff
University of British Columbia
Erik Johnson
University of Richmond
Piet Eichholtz
Maastricht University
JEL Classifications
  • D2 - Production and Organizations
  • R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location