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Fooled by Search: Housing Prices, Turnover and Bubbles

Staff Working Paper 2012-3 Brian Peterson
his paper develops and estimates a model to explain the behaviour of house prices in the United States. The main finding is that over 70% of the increase in house prices relative to trend during the increase of house prices in the United States from 1995 to 2006 can be explained by a pricing mechanism where market participants are ‘Fooled by Search.’
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