Getting It Right or Getting It Cursed: Auction Prices in a Residential Real Estate Bubble

35 Pages Posted: 3 Nov 2016

See all articles by Clare Branigan

Clare Branigan

University College Dublin

Cal B. Muckley

University College Dublin

Paul Ryan

University College Dublin - Department of Banking & Finance

Multiple version iconThere are 3 versions of this paper

Date Written: November 3, 2016

Abstract

This is the first study to test for a winner’s curse in a bubble market. Our hand-collected sample comprises the entire sequence of bids and the experience of the winning bidder at Irish residential real estate auctions, prior to the collapse of the bubble. Portfolios of practitioner-selected self-similar properties and a hedonic pricing model facilitate benchmark property price estimation. We show neither real estate investors nor owner occupiers shade auction bids to avoid the winner’s curse. Winning real estate investors, however, pay more for properties. Thus, real estate investors ride the wave of a property bubble and potentially exacerbate it.

Keywords: bubbles, winner’s curse, residential real estate, professional investor, owner occupier

JEL Classification: G00, G01, G02, G10, R31

Suggested Citation

Branigan, Clare and Muckley, Cal B. and Ryan, Paul, Getting It Right or Getting It Cursed: Auction Prices in a Residential Real Estate Bubble (November 3, 2016). Available at SSRN: https://ssrn.com/abstract=2863889 or http://dx.doi.org/10.2139/ssrn.2863889

Clare Branigan

University College Dublin ( email )

Belfield
Belfield, Dublin 4 4
Ireland

Cal B. Muckley

University College Dublin ( email )

Blackrock, Co. Dublin
Ireland
+353-1-716-8091 (Phone)

Paul Ryan (Contact Author)

University College Dublin - Department of Banking & Finance ( email )

Belfield
Dublin 4
Ireland
+353-1-716-4770 (Phone)

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