Does the Salience of Risk Affect Large, Risky Asset Purchases?

This paper documents that when a southern California home gets designated to a wildfire risk zone, its price drops by 11% relative to homes just outside the designation boundary. Whereas the risk designation is discontinuous, the underlying risk is continuous — suggesting the price effect is due to greater risk salience rather than greater risk. Moreover, after a nearby fire, transaction prices of homes with a view of the burn scar drop by 5% relative to the prices of otherwise similar homes — an effect significant only for the first year post-fire and too large to be explained by visual disamenities alone.

• Publication year

  2020

• Venue

  Social Science Research Network

• Publication date

  2020-05-25

• Fields of study

  Business, Economics, Environmental Science

• Identifiers
  DOI 10.2139/SSRN.3398404
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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