Money illusion and housing frenzies

• 成果类型: Article; Proceedings Paper
• 署名作者: Brunnermeier, Markus K.; Julliard, Christian
• 署名单位: Princeton University; University of London; London School Economics & Political Science
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhm043
• 发表日期: 2008
• 页码: 135
• 关键词: STOCK RETURNS; inflation; MARKET; prices; bubbles; MODEL; fundamentals; DYNAMICS; BEHAVIOR

摘要

A reduction in inflation can fuel run-ups in housing prices if people suffer from money illusion. For example, investors who decide whether to rent or buy a house by simply comparing monthly rent and mortgage payments do not take into account the fact that inflation lowers future real mortgage costs. We decompose the price-rent ratio into a rational component-meant to capture the proxy effect and risk premia-and an implied mispricing. We find that inflation and nominal interest rates explain a large share of the time series variation of the mispricing, and that the tilt effect is very unlikely to rationalize this finding.