Innovations in Economic Measurement and Policy: From Hardships to Market Dynamics
Paper Session
Saturday, Jan. 4, 2025 10:15 AM - 12:15 PM (PST)
- Chair: Scott Wentland, George Washington University
When the Price is Right: Home Value Misperception and Measurement of Wealth Disparities
Abstract
Measuring wealth inequality in the United States relies on survey data, as limited administrative data sources exist. Survey respondents provide detailed answers to their net wealth's disaggregated components, including a self-assessment of the value of their home, which is typically their largest single asset. In this paper, we investigate whether self-reported home values align with market transaction values; and; to the extent they diverge, why do they, and what are the implications for racial wealth inequality and other key statistics? To answer these questions, we exploit a unique dataset linking a large national dataset of home transactions to internal American Community Survey (ACS) microdata at the address-level. Comparing transactions that occur in close proximity to the survey date from 2008-2016, our initial results suggest that homeowners modestly overestimate (5%) their home's value on average, but with substantial variation by region and over the business cycle (as much as 15% in 2008). Importantly, we find misperception in home value varies systematically across demographic, income, and economic characteristics of the household, most notably by race. Our findings imply heterogeneity in misperception can significantly alter recent trends in racial wealth gaps, as the Black-White wealth gap may be understated by as much as 40% by official statistics in some years. For context, we compare these results with other macroeconomic measurements that rely on self-assessed values, like Personal Consumption Expenditures (PCE), which are generally less distorted than wealth measurements over the period we study.Asymmetric Information and Bidding Behavior in Failed Bank Auctions
Abstract
Asymmetric information has significant implications for bidder behavior and optimal auction design. In this study, we focus on asymmetric information in failed bank auctions, where asset quality is uncertain ex ante. Using confidential data on the post-auction performance of failed bank assets, we investigate the extent to which bidders’ knowledge of asset quality affects their bidding behavior and subsequent performance. We focus on two potential sources of bidder knowledge - geographic distance and portfolio similarity. Our results suggest that bidders located farther away from the failed bank being auctioned are less informed about the asset quality, and these distant bidders tend to submit weaker bids. We do not find a similar role for portfolio similarity. We then construct an empirical measure of the winner’s curse based on the post-auction performance of acquired assets, and find that distant bidders are more likely to experience this phenomenon. At the same time, we do not find any evidence that acquirers who overvalued the assets performed worse in the years following the auction when compared with acquirers who undervalued the assets, suggesting that these acquirers received other benefits to compensate.Discussant(s)
Jeremy Moulton
,
University of North Carolina-Chapel Hill
James Foster
,
George Washington University
Filippo Cavaleri
,
University of Chicago
JEL Classifications
- I0 - General
- D0 - General