Evidence of anti-herding in Canadian regional housing markets

Abstract

The lack of transparency in real estate markets, combined with issues of asset heterogeneity and illiquidity, makes participants particularly susceptible to the influence of behavioral biases. In this paper, I investigated the phenomena of herding and anti-herding in Canada's regional housing markets, using data from February 1986 to November 2023. A comprehensive set of econometric techniques, including sub-sample analysis, rolling window regressions, quantile regressions, and probit regressions, was employed to examine these behaviors. My findings were consistent with the presence of anti-herding in most regions studied, with significant temporal dynamics. Anti-herding behavior was more prevalent during periods of lower economic policy risk. Additionally, substantial cross-regional effects in herding and anti-herding behaviors were observed throughout the study period. These results suggested that strong private information, due to the regional segmentation of the Canadian housing market, plays a critical role in driving these behaviors. Robustness tests confirmed the reliability of my findings. This study contributes to the literature by highlighting the nuanced dynamics of behavioral biases in regional housing markets and offers insights into how economic policy uncertainty influences market behavior.