Risk Perception of Rare Catastrophic Events in Housing Markets : Evidence from Jet Crash Risk

We present evidence of differential effects of risk perception in the housing market. We use housing transaction data near military bases to examine capitalization of potential military jet accident risk in house prices. We find that properties in accident potential zones (APZs) transact at lower prices. In addition, we find that the perceived effect is much more pronounced following a jet crash in the area and mitigates over passage of time. Thus, we highlight the role of recency in asset pricing as market participants differentially account for relevant information