Does large volatility help?—stochastic population forecasting technology in explaining real estate price process
AbstractThis paper investigates the association between real estate demand and the volatility of population changes. In a financial liberalized housing market, the housing mortgage loan implies insurance function to homeowners through the default option. Larger expected volatilities in the population imply a higher value of the default option. When analyzing the impact of the long-term population development on housing prices, the traditional deterministic population forecasting employed by previous research provides limited credibility. By means of the newly developed stochastic population forecasting methodology and counterfactual numerical simulations, we found a huge volatility associated with long-term population forecasting. A positive correlation between the expected volatility of population changes and real estate demand is ascertained. Copyright Springer-Verlag 2013
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Bibliographic InfoArticle provided by Springer in its journal Journal of Population Economics.
Volume (Year): 26 (2013)
Issue (Month): 1 (January)
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Web page: http://link.springer.de/link/service/journals/00148/index.htm
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Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
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