Inhibitory effect of house price bullish sentiment on adverse selection: Evidence from resale housing trading experiments
Hong ZHANG1,2(),Xu SUN1,2,Yang ZHANG3
1. Hang Lung Center for Real Estate, Tsinghua University,Beijing 100084, China 2. Center for Urbanization and Industrial Development, Tsinghua University, Beijing 100084, China 3. Department of Property Management, School of Economics and Management, Beijing Forestry University, Beijing 100083, China
This article focuses on the inhibitory effect exerted by house price bullish sentiment on adverse selection in resale housing markets. Firstly, theoretical methods are developed for the bullish sentiment index (BSI) and the adverse selection level (ASL). Economics experiments were then designed to study the resale housing market characteristics in different bullish sentiment environments. The BSI and ASL were calculated from the experimental data to study the effect of bullish sentiment on the adverse selection. The research shows that severe information asymmetry is the main cause of adverse selection in the resale housing market. The bullish sentiment of traders in the market temporarily restrains the adverse selection to some extent. The degree of information asymmetry should be reduced to minimize the adverse selection problem in the resale housing market.
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Hong ZHANG,Xu SUN,Yang ZHANG. Inhibitory effect of house price bullish sentiment on adverse selection: Evidence from resale housing trading experiments. Journal of Tsinghua University(Science and Technology), 2015, 55(1): 63-67.
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