Do People Overreact? Evidence from the Housing Market After the Wenchuan Earthquake

Guoying Deng, Li Gan, Manuel A. Hernandez

NBER Working Paper No. 19515
Issued in October 2013
NBER Program(s):   AG

This paper uses the 2008 Wenchuan earthquake in China as a natural experiment to examine how the housing market reacted to this unforeseen, extreme event. We use a unique transaction dataset for new (under construction) apartment units to analyze the pricing behavior of units in lower versus upper floors before and after the earthquake. We observe that average housing prices decreased after the tremor. However, the relative price of low to high floor units, particularly units located in the first and second floor, considerably increased for several months after the earthquake. This relative pricing pattern is in line with a higher risk perception and fear, triggered after the tremor, of living in upper floors. Additional robustness checks support the apparent overreaction of individuals to a dramatic event.

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.



Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19515

Users who downloaded this paper also downloaded these:
Liu, Meng, and Wang w19615 Confucianism and Preferences: Evidence from Lab Experiments in Taiwan and China
Frazzini, Kabiller, and Pedersen w19681 Buffett’s Alpha
Shiue w19661 Human Capital and Fertility in Chinese Clans Before Modern Growth
Akcigit, Hanley, and Serrano-Velarde w19473 Back to Basics: Basic Research Spillovers, Innovation Policy and Growth
Fan, Kanbur, Wei, and Zhang w19648 The Economics of China: Successes and Challenges

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us