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

29 Pages Posted: 19 May 2020

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 2019

Abstract

This is the first study to test for a winner's curse in a bubble market. Our hand‐collected sample comprises the 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‐ and hedonic pricing model‐selected self‐similar properties provide benchmark property price estimates. We show neither real estate investors nor owner occupiers shade auction bids to avoid the winner's curse and both raise bids in line with competition. Winning investor bidders pay more for properties, ride the wave of a property bubble, and potentially exacerbate it.

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

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 2019). European Financial Management, Vol. 25, Issue 5, pp. 1121-1149, 2019, Available at SSRN: https://ssrn.com/abstract=3600272 or http://dx.doi.org/10.1111/eufm.12200

Clare Branigan (Contact Author)

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

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

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

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