Behavioral changes and policy effects during Covid-19

Abstract

We 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. We find that behavior changed voluntarily before the lock-down, and we 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 we compare observed price developments with our estimated counter-factual price developments, we 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. We 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.