Spillovers in Asset Prices : The Curious Case of Haunted Houses

Exploiting the unique institutional setting of Hong Kong's real estate market, we uncover a curious ripple effect of haunted houses on the prices of nearby houses. Prices drop on average 19% for units that become haunted, 9% for units on the same floor, 6% for units in the same block, and 1% for units in the same estate. Our study makes two contributions. First, we provide an estimate of a large negative spillover on prices caused by an idiosyncratic quality shock. Second, we find that the demand shock rather than the fire sale supply shock explains most of the spillover