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Research Department Working Papers

The Impact of Labels on Real Asset Valuations

No. 2504
Yuliya Demyanyk, Luis A. Lopez and Nitzan Tzur-Ilan

Abstract: Expectations and sentiment of economic agents about financial prospects are both the drivers and the leading indicators of economic phenomena. This paper shows that neighborhood labels, frequently used in realtors’ property descriptions, have a causal impact on the demand for housing. Results indicate that appraised values, house prices and rents increased in minority neighborhoods upon removal of neighborhood labels. The underlying mechanism likely works through forming expectations about future growth in housing markets, as documented by the decrease in the rent-to-price ratio and lack of change in the creditworthiness of the neighborhood residents.

DOI: https://doi.org/10.24149/wp2504

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