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Price Discovery in Time and Space: The Course of Condominium Prices in Singapore

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Author Info

  • Min Hwang

    (University of California, Berkeley)

  • John M. Quigley

    (University of California, Berkeley)

Abstract

Despite evidence that aggregate housing price are predictable, a random walk in time and independence in space are two maintained hypotheses in the empirical models for housing price measurement used by government and commercial companies. This paper examines the price discovery process in individual dwellings over time and space by relaxing both assumptions, using data from the Singapore private condominium market. We develop a model that tests directly the hypotheses that the prices of individual dwellings follow a random walk over time and that the price of an individual dwelling is independent of the price of a neighboring dwelling. The model is general enough to include other widely used models of housing price determination, such as Bailey, Muth, and Nourse (1963), Case and Shiller (1987) and Redfearn and Quigley (2000), as special cases. The empirical results clearly support mean reversion in housing prices and also diffusion of innovations over space. Our estimates of the level of housing prices, derived from a generalized repeat sales model, suggest that serial and spatial correlation matters in the computation of price indices and the estimation of price levels. investment returns is completely absent.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0303011.

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Length: 58 pages
Date of creation: 19 Mar 2003
Date of revision:
Handle: RePEc:wpa:wuwpma:0303011

Note: 58 pages, Acrobat .pdf
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Web page: http://128.118.178.162

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Cited by:
  1. Hjalmarsson, Erik & Hjalmarsson, Randi, 2009. "Efficiency in housing markets: Which home buyers know how to discount?," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 2150-2163, November.
  2. Hwang, Min & Quigley, John M., 2003. "Selectivity, Quality Adjustment and Mean Reversion in the Measurement of House Values," Berkeley Program on Housing and Urban Policy, Working Paper Series qt4045q0v3, Berkeley Program on Housing and Urban Policy.
  3. Charles Ka Yui Leung, 2005. "Equilibrium Correlation of Asset Price and Return," Departmental Working Papers _175, Chinese University of Hong Kong, Department of Economics.
  4. Hua Sun & Yong Tu & Shi-Ming Yu, 2005. "A Spatio-Temporal Autoregressive Model for Multi-Unit Residential Market Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 31(2), pages 155-187, September.
  5. Hjalmarsson, Erik & Hjalmarsson, Randi, 2006. "Efficiency In Housing Markets: Do Home Buyers Know How To Discount?," Working Papers in Economics 232, University of Gothenburg, Department of Economics.

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