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Testing for rational speculative bubbles in the Brazilian residential real-estate market

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  • Marcelo M. de Oliveira
  • Alexandre C. L. Almeida
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    Abstract

    Speculative bubbles have been occurring periodically in local or global real estate markets and are considered a potential cause of economic crises. In this context, the detection of explosive behaviors in the financial market and the implementation of early warning diagnosis tests are of critical importance. The recent increase in Brazilian housing prices has risen concerns that the Brazilian economy may have a speculative housing bubble. In the present paper, we employ a recently proposed recursive unit root test in order to identify possible speculative bubbles in data from the Brazilian residential real-estate market. The empirical results show evidence for speculative price bubbles both in Rio de Janeiro and Sao Paulo, the two main Brazilian cities.

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    File URL: http://arxiv.org/pdf/1401.7615
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    Paper provided by arXiv.org in its series Papers with number 1401.7615.

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    Date of creation: Jan 2014
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    Publication status: Published in Contemporary Studies in Economic and Financial Analysis 96 (2014)
    Handle: RePEc:arx:papers:1401.7615

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    Web page: http://arxiv.org/

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