Convergence Of Metropolitan House Prices In South Africa: A Re-Examination Using Efficient Unit Root Tests
AbstractThis paper analyzes whether the Law of One Price (LOOP) holds in the housing market of five metropolitan areas of South Africa, namely Cape Town, Durban, Greater Johannesburg, Port Elizabeth/Uitenhage and Pretoria. We test the existence of LOOP using the efficient unit root tests proposed by Elliott et al. (1996) [DF-GLS] and Elliott (1999) [DF-GLSu] based on monthly data on residential property prices covering the period of 1967:01 to 2009:03 for the large-, medium and small-middle segments of the housing market. Based on the DF-GLSu test, we find overwhelming evidence of the existence of LOOP in twelve of the fifteen cases, especially as the sample periods include more recent data. More importantly, our results are in sharp contrast with those obtained by Burger and Van Rensburg (2008) using quarterly data to based on the Im, Pesharan and Shin (IPS, 2003) test, which are, in turn, shown to be highly sensitive to frequency of the data and temporal aggregation. With the rejection of the null hypothesis of unit roots, based on panel data tests, not providing sufficient evidence to conclude that all the series in the panels have a unit root or not, more reliability should be placed on our results obtained from the efficient unit root tests.
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Bibliographic InfoArticle provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.
Volume (Year): 10 (2010)
Issue (Month): 1 ()
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Other versions of this item:
- Sonali Das & Rangan Gupta & Patrick Agu Kaya, 2009. "Convergence of Metropolitan House Prices in South Africa: A Re-Examination Using Efficient Unit Root Tests," Working Papers 200922, University of Pretoria, Department of Economics.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
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