‘Overoptimism’ a factor in house price bubbles, Danish paper finds
Authors highlight how sentiment can become “decoupled” from fundamentals
Sentiment appears to be a major factor in the development of house price bubbles, with "overoptimistic" households more likely to buy houses and take on debt to do so, according to a working paper published by the National Bank of Denmark on October 28.
Authors Andreas Kuchler, Kim Abildgren and Niels Lynggård Hansen study links between consumer confidence and house prices in a VAR model, before turning to a more behavioural, microeconomic approach to examine how overoptimism affects household
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