Rational Expectations, Market Fundamentals and Housing Price Volatility
AbstractThis paper derives a forward-looking rational expectations house price model and empirically tests its ability to explain short-run fluctuations in real house prices. A novel approach to proxying the imputed rents of owner-occupied housing, as a function of observable housing market fundamentals, is combined with a housing market arbitrage relation to derive a present value model for real house prices. Tests of the rational expectations, nonlinear cross-equation restrictions reject the joint null hypothesis of rational expectations and the asset-based housing price model for quarterly, single-detached house prices in the city of Vancouver, British Columbia from 1979-1991. The model fails to fully capture observed house price dynamics in two real estate booms but tracks real house prices well in less volatile times, suggesting that prices may temporarily deviate from fundamental values in real estate price cycles. Copyright American Real Estate and Urban Economics Association.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.
Volume (Year): 24 (1996)
Issue (Month): 4 ()
Contact details of provider:
Postal: Indiana University, Kelley School of Business, 1309 East Tenth Street, Suite 738, Bloomington, Indiana 47405
Phone: (812) 855-7794
Fax: (812) 855-8679
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1080-8620
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Tom Engsted & Thomas Q. Pedersen, 2013. "Housing market volatility in the OECD area: Evidence from VAR based return decompositions," CREATES Research Papers 2013-04, School of Economics and Management, University of Aarhus.
- Juan Ayuso & Roberto Blanco & Fernando Restoy, 2006. "House prices and real interest rates in Spain," Banco de Espaï¿½a Occasional Papers 0608, Banco de Espa�a.
- Koetter, Michael & Poghosyan, Tigran, 2008. "Real estate markets and bank distress," Discussion Paper Series 2: Banking and Financial Studies 2008,18, Deutsche Bundesbank, Research Centre.
- John V. Duca & John Muellbauer & Anthony Murphy, 2010.
"Housing Markets and the Financial Crisis of 2007-2009: Lessons for the Future,"
SERC Discussion Papers
0049, Spatial Economics Research Centre, LSE.
- Duca, John V. & Muellbauer, John & Murphy, Anthony, 2010. "Housing markets and the financial crisis of 2007-2009: Lessons for the future," Journal of Financial Stability, Elsevier, vol. 6(4), pages 203-217, December.
- Eddie C. M. Hui & Joe T. Y. Wong, 2009. "The Forecasting Capacity of Housing Price Expectations," International Real Estate Review, Asian Real Estate Society, vol. 12(1), pages 39-61.
- Lim, William W., 1997. "Observing Sunspots at Home," Journal of Housing Economics, Elsevier, vol. 6(3), pages 203-222, September.
- Jason Barr, 2010.
"Skyscrapers and the Skyline: Manhattan, 1895-2004,"
Real Estate Economics,
American Real Estate and Urban Economics Association, vol. 38(3), pages 567-597.
- Ayuso, Juan & Restoy, Fernando, 2007. "House prices and rents in Spain: Does the discount factor matter?," Journal of Housing Economics, Elsevier, vol. 16(3-4), pages 291-308, November.
- Ayuso, Juan & Restoy, Fernando, 2006. "House prices and rents: An equilibrium asset pricing approach," Journal of Empirical Finance, Elsevier, vol. 13(3), pages 371-388, June.
- Juan Ayuso & Fernando Restoy, 2003. "House prices and rents: an equilibrium asset pricing approach," Banco de Espaï¿½a Working Papers 0304, Banco de Espa�a.
- Juan Ayuso & Fernando Restoy, 2006. "House prices and rents in Spain: does the discount factor matter?," Banco de Espaï¿½a Working Papers 0609, Banco de Espa�a.
- Pavlidis, Efthymios & Yusupova, Alisa & Paya, Ivan & Peel, David & Martinez-Garcia, Enrique & Mack, Adrienne, 2014. "Monitoring housing markets for episodes of exuberance: an application of the Phillips et al. (2012, 2013) GSADF test on the Dallas Fed International House Price Database," Globalization and Monetary Policy Institute Working Paper 165, Federal Reserve Bank of Dallas.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.