cover_german-economic-review.jpg

Investor Rationality and House Price Bubbles: The Case of Berlin and the German Reunification

We analyze the behavior of investors in the Berlin rental apartment house market over the years 1980–2004. Using constant-quality multipliers (price–rent ratios), we reject the hypothesis that multipliers in the market were set in a rational manner. Supported by narrative evidence, we conjecture that investors misjudged the economic effects of the German reunification. To examine this, we employ a stylized structural economic model and analyze the effects of shocks on rational multipliers. It seems that investors confused the reunification with a permanent supply side shock to the economy. By basing their investment decisions on this misjudgement, investors behaved irrationally, but in a very uncertain and unprecedented environment.

01. Oktober 2010

Autoren Oliver Holtemöller R. Schulz

Ihr Kontakt

Für Wissenschaftler/innen

Für Journalistinnen/en

Mitglied der Leibniz-Gemeinschaft LogoTotal-Equality-LogoGefördert durch das BMWK