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A Behavioral Explanation to Spatial Dependencies in Commercial Real Estate Asset Prices

Author

Listed:
  • Prashant Das
  • Parmanand Sinha
  • Julia Freybote
  • Roland Fuess

Abstract

In this study we provide a behavioral explanation for spatial dependence in commercial property asset pricing. We analyze nearly 6000 hotel transactions in the US between 2001 and 2016 applying temporal spatial autoregression with autoregressive error (T-SARAR) models to test the behavioral explanation. We show that the spatial lags are partially driven by behavioral biases whereas the spatial errors do not exhibit a distinct pattern of association with market conditions which are known to influence the investor behavior. In particular, spatial lags influence future transactions the most when irrational sentiments are the lowest (during periods of unexplained pessimism) or when the rational financial market anxiety is the highest (during periods of economic turmoil).

Suggested Citation

  • Prashant Das & Parmanand Sinha & Julia Freybote & Roland Fuess, 2019. "A Behavioral Explanation to Spatial Dependencies in Commercial Real Estate Asset Prices," ERES eres2019_29, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2019_29
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2019-29
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    More about this item

    Keywords

    Behavioral Real Estate; Hedonic Model; Hotel; sentiments; Spatial dependence;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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