Detecting Bubbles in the Hong Kong Residential Property Market: An Explosive-Pattern Approach
AbstractThis study applies the newly developed bubble detection method (Phillips, Wu and Yu, 2011) to identifying asset bubbles in the Hong Kong residential property market. Our empirical results show that the method is capable of detecting the 1997 bubble and is able to reveal the corresponding origination and collapse, showing its superiority over the standard unit root and co-integration method. During the period between mid-2009 and early 2011, the method indicates strong upward price pressure in the mass segment and bubble-type behaviour in two short periods of time in the luxury segment. The results, however, show potential shortcomings of the method including: the high correlation between the price-rent differentials and t-statistics near the critical values, and the symmetric property towards explosive growth and precipitant fall of the time series.
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Bibliographic InfoPaper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 012012.
Length: 18 pages
Date of creation: Jan 2012
Date of revision:
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More information through EDIRC
Asset Bubble; Residential Property Prices; Right-Tailed Unit Root Test; Explosive Behaviour; Price-To-Rent Ratio;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
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