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Sentiment and its asymmetric effect on housing returns
Author(s) -
Saydometov Sergiy,
Sabherwal Sanjiv,
Aroul Ramya Rajajagadeesan
Publication year - 2020
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1002/rfe.1097
Subject(s) - negativity effect , economics , market sentiment , index (typography) , sentiment analysis , stock (firearms) , stock market , econometrics , construct (python library) , monetary economics , financial economics , psychology , computer science , social psychology , mechanical engineering , paleontology , horse , machine learning , world wide web , engineering , biology , programming language
We use Google search frequency to construct sentiment indices (positive and negative) for the housing market. We find that future housing prices are negatively related to our measure of negative sentiment but not significantly related to that of positive sentiment. These relationships are robust to controls for macroeconomic variables, stock market return, and Housing Market Index, a survey‐based housing sentiment index. Furthermore, we find that an increase in negative sentiment results in a significant negative response in housing prices, while a decrease evokes little response. Thus, the housing market exhibits asymmetric responses to negative and positive sentiment and to increases versus decreases in negative sentiment. We attribute these asymmetric responses to the “negativity effect.” Finally, we find that home prices are more sensitive to sentiment during recessionary periods.