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Testing Alternative Theories of the Property Price-Trading Volume Correlation

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  • Charles K. Y. Leung

    ()
    (Chinese University of Hong Kong, Shatin, Hong Kong)

  • Garion C. K. Lau

    ()
    (Chinese University of Hong Kong, Shatin, Hong Kong)

  • Youngman C. F. Leong

    ()
    (Chinese University of Hong Kong, Shatin, Hong Kong)

Abstract

This article examines the correlation between the real housing price and trading volume. Contrary to the predictions of standard rational expectation models, a robust positive correlation between the two variables is identified. While no clear lead-lag relationship is found in the raw data, which is more consistent with the downpayment effect model, the medium-run component of the trading volume tends to lead (and Granger cause) the corresponding component of the property price, which is more consistent with the search theoretic model. An explanation for this difference in behavior is suggested and several future research directions are provided.

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Bibliographic Info

Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

Volume (Year): 23 (2002)
Issue (Month): 3 ()
Pages: 253-264

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Handle: RePEc:jre:issued:v:23:n:3:2002:p:253-264

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Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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  1. David Genesove & Christopher Mayer, . "Loss Aversion and Seller Behavior: Evidence from the Housing Market," Zell/Lurie Center Working Papers 323, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
  2. Saatcioglu, Kemal & Starks, Laura T., 1998. "The stock price-volume relationship in emerging stock markets: the case of Latin America," International Journal of Forecasting, Elsevier, vol. 14(2), pages 215-225, June.
  3. Hiemstra, Craig & Jones, Jonathan D, 1994. " Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation," Journal of Finance, American Finance Association, vol. 49(5), pages 1639-64, December.
  4. Burnside, Craig, 1998. "Detrending and business cycle facts: A comment," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 513-532, May.
  5. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November.
  6. Leung, Charles Ka Yui, 2001. "Relating International Trade to the Housing Market," Review of Development Economics, Wiley Blackwell, vol. 5(2), pages 328-35, June.
  7. Jeremy C. Stein, 1993. "Prices and Trading Volume in the Housing Market: A Model with Downpayment Effects," NBER Working Papers 4373, National Bureau of Economic Research, Inc.
  8. Eric A. Hanushek & Steven G. Rivkin & Lori L. Taylor, 1996. "Aggregation and the Estimated Effects of School Resources," NBER Working Papers 5548, National Bureau of Economic Research, Inc.
  9. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  10. Wang, Jiang, 1994. "A Model of Competitive Stock Trading Volume," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 127-68, February.
  11. Follain, James R. & Velz, Orawin T., 1995. "Incorporating the Number of Existing Home Sales into a Structural Model of the Market for Owner-Occupied Housing," Journal of Housing Economics, Elsevier, vol. 4(2), pages 93-117, June.
  12. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(01), pages 109-126, March.
  13. James A. Berkovec & John L. Goodman, 1996. "Turnover as a Measure of Demand for Existing Homes," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 24(4), pages 421-440.
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