Behavioral changes and policy effects during Covid-19

In the new CAMP Working Paper 07/2020, Anundsen, Kivedal, Larsen and Thorsrud exploit unique Norwegian day-by-day transaction and bid-by-bid auction data in order to examine how market participants reacted to the spreading news of Covid-19 in early March 2020, the lock-down on March 12, and the re-opening on April 20. They find that behavior changed voluntarily before the lock-down, and they find effects on the housing market from both the lock-down and the re-opening. In particular, there exists a discontinuity on the date of the lock-down in transaction volumes, sell-prediction spreads, aggressive bidding behavior, and seller confidence. However, when they observed price developments with the estimated counter-factual price developments, they find that roughly half of the total fall in prices had occurred when the lock-down was implemented. The re-opening completely reverses the lock-down effect on prices. They also show that voluntary behavioural changes, as well as lock-down and re-opening effects, are visible in various measures of social mobility, and that changes in daily news sentiment correlate with the abnormal price movements during this period.

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