Sentiment, Consumption and Housing Choices
Dr. Ziyou Wang
Lecturer of Real Estate
Henley Business School, University of Reading
Date: 16 January 2025 (Thursday)
Time: 10:30 to 12:00
Venue: E22-G008
Host: Prof. Rose Lai, Professor in Finance
Abstract
Growing literature shows housing demand is susceptible to market sentiment. However, lack of studies addressing the problem of how sentiment affects the household’s housing choices reminds that the pattern of individual housing demand hasn’t been fully understood. In this study, a life-cycle model is established to investigate the sentiment effects in dynamic housing demand in the long run. The model implies that sentiment positively affects the likelihood of first-time home purchase while scarcely affects the likelihood of house transacting. Sentiment also takes critical impacts on household choices between housing and non-housing consumptions. When sentiment moves from extreme levels (of either positive or negative sentiment) to moderate levels, it reduces the marginal rate of substitution (MRS) between housing and non-housing consumptions. Numerical simulations confirm the theoretical model implications and offer some practical implications. Overall, sentiment erodes the total utility over life cycle, and being optimistic (overconfident) would further reduce the household’s life-cycle utility.
Speaker
Prof. Ziyou Wang holds a PhD in Urban Economics from The Hong Kong Polytechnic University. He joined Henley Business School in August 2022 as a Lecturer. Prior to this role, he served as a Lecturer in Financial Economics at Coventry University London and completed a postdoctoral fellowship at the University of Cambridge. Ziyou’s research interests include Behavioural Economics and Urban Economics. His work aims to apply economic and behavioural insights to the dynamics of urban and regional development, with a focus on individual decision-making. He studies how individuals respond to urban policies and impact local economic development.
All are welcome!
