An Analysis Of Herd Effect On Real Estate Market Of China

The bubble growth in real estate market is a common economic phenomenon around the world, and therefore an important issue in the real estate market studies. Many researchers try to understand the problem in various aspects such as economic fundamentals, supply and demand structures, bank credit, and rational expectations, etc. Those theories however can not completely explain the short period price fluctuations.Behavioral economics offers a new approach to the problem, by pointing out that the ultimate importance of the psychological and behavioral factors of human beings. Micro information economics amends the traditional model of the complete information hypothesis by bringing forward the effect of incomplete information. There are direct interaction and impact between the individual investors. Therefore private information source plays a crucial role for the individual decision makers.The layout of the dissertation is as follows. The background and significance of the topic, reviewing the basic speculative bubble theory and the status quo of the study on real estate are introduced in Chapter 1. The formation mechanism of herd behavior in real estate market and the bubble creation and explosion are analyzed in Chapter 2. Based on the housing market data of Beijing, we then present a case analysis on herd behavior in the real estate market of China, using the GCAPM model developed for equity market. It is also found that the herd behavior exists in other medium and big-sized cities by making use of empirical test. The thesis is then concluded in the last chapter by summary, first discussions and suggestions.