{"title":"Peer Sentiment and Firm Production Decisions: Evidence from Homebuilders","authors":"","doi":"10.1007/s11146-024-09976-1","DOIUrl":null,"url":null,"abstract":"<h3>Abstract</h3> <p>This paper examines the effect of peer sentiment on firm production decisions using data from public homebuilders in the US. Peer sentiment is measured by the NAHB/Wells Fargo Housing Market Index, derived from a monthly survey of homebuilders’ perceptions about the housing market. A one-standard-deviation increase in the peer sentiment index induces an average builder to increase their land inventory by 6.4% (4,937 lots) and building expenses by 5.9% ($34.5 million). The effect is weaker when firms are highly divided in their opinions. Following peer sentiment does not affect stock price performance, but overbuilding is associated with a lower return-on-asset.</p>","PeriodicalId":22891,"journal":{"name":"The Journal of Real Estate Finance and Economics","volume":"50 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2024-02-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"The Journal of Real Estate Finance and Economics","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1007/s11146-024-09976-1","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
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Abstract
This paper examines the effect of peer sentiment on firm production decisions using data from public homebuilders in the US. Peer sentiment is measured by the NAHB/Wells Fargo Housing Market Index, derived from a monthly survey of homebuilders’ perceptions about the housing market. A one-standard-deviation increase in the peer sentiment index induces an average builder to increase their land inventory by 6.4% (4,937 lots) and building expenses by 5.9% ($34.5 million). The effect is weaker when firms are highly divided in their opinions. Following peer sentiment does not affect stock price performance, but overbuilding is associated with a lower return-on-asset.
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