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Temporal and Spatial Information Diffusion in Real Estate Price Changes and Variances

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  • Walter Dolde
  • Dogan Tirtiroglu

Abstract

This article examines patterns of temporal and spatial diffusion of real estate price changes. In addition to means, changes in volatility are tracked in reaction to substantial new information, estimated with GARCH-M methods. The data covers towns in Connecticut and near San Francisco. There is evidence of negative feedback at short lags, contrary to previous research on housing and other assets. There is also evidence of a moving average error process which tends to reverse recent shocks. Significantly positive spatial information diffusion is found from neighboring towns in Connecticut but none in control tests on nonneighboring towns. The results also include evidence of a risk-reward tradeoff in housing price changes in the San Francisco area. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • Walter Dolde & Dogan Tirtiroglu, 1997. "Temporal and Spatial Information Diffusion in Real Estate Price Changes and Variances," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(4), pages 539-565.
  • Handle: RePEc:bla:reesec:v:25:y:1997:i:4:p:539-565
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    Cited by:

    1. Oikarinen, Elias, 2005. "The Diffusion of Housing Price Movements from Centre to Surrounding Areas," Discussion Papers 979, The Research Institute of the Finnish Economy.
    2. Michail Karoglou & Bruce Morley & Dennis Thomas, 2013. "Risk and Structural Instability in US House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 46(3), pages 424-436, April.
    3. Mark J. Garmaise & Tobias J. Moskowitz, 2002. "Confronting Information Asymmetries: Evidence from Real Estate Markets," NBER Working Papers 8877, National Bureau of Economic Research, Inc.
    4. Chen, Pei-Fen & Chien, Mei-Se & Lee, Chien-Chiang, 2011. "Dynamic modeling of regional house price diffusion in Taiwan," Journal of Housing Economics, Elsevier, vol. 20(4), pages 315-332.
    5. Bruce Morley & Dennis Thomas, 2016. "An Empirical Analysis of UK House Price Risk Variation by Property Type," Review of Economics & Finance, Better Advances Press, Canada, vol. 6, pages 45-56, May.
    6. S. Wong & K. Chau & C. Yiu, 2007. "Volatility Transmission in the Real Estate Spot and Forward Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 35(3), pages 281-293, October.
    7. Costello, Greg & Fraser, Patricia & Groenewold, Nicolaas, 2011. "House prices, non-fundamental components and interstate spillovers: The Australian experience," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 653-669, March.
    8. Gregory J. Costello, 2001. "A Spatial Approach to Price Segmentation in Housing Markets," ERES eres2001_139, European Real Estate Society (ERES).
    9. Norman Miller & Liang Peng, 2006. "Exploring Metropolitan Housing Price Volatility," The Journal of Real Estate Finance and Economics, Springer, vol. 33(1), pages 5-18, August.
    10. Ming-Chu Chiang & I-Chun Tsai, 2016. "Ripple effect and contagious effect in the US regional housing markets," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(1), pages 55-82, January.
    11. Simlai, Prodosh, 2014. "Estimation of variance of housing prices using spatial conditional heteroskedasticity (SARCH) model with an application to Boston housing price data," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 17-30.
    12. Chyi Lin Lee, 2009. "Housing price volatility and its determinants," International Journal of Housing Markets and Analysis, Emerald Group Publishing, vol. 2(3), pages 293-308, August.
    13. David Gray, 2015. "Hidden Properties of Irish House Price Vintages," Housing Studies, Taylor & Francis Journals, vol. 30(8), pages 1317-1353, November.
    14. William Miles, 2011. "Long-Range Dependence in U.S. Home Price Volatility," The Journal of Real Estate Finance and Economics, Springer, vol. 42(3), pages 329-347, April.
    15. Zeno Adams & Roland Füss & Felix Schindler, 2015. "The Sources of Risk Spillovers among U.S. REITs: Financial Characteristics and Regional Proximity," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(1), pages 67-100, March.
    16. Yongheng Deng & Eric Girardin & Roselyne Joyeux, 2015. "Fundamentals and the Volatility of Real Estate Prices in China: A Sequential Modelling Strategy," Working Papers 222015, Hong Kong Institute for Monetary Research.
    17. Mei-Se Chien, 2010. "Structural Breaks and the Convergence of Regional House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 40(1), pages 77-88, January.
    18. Fuerst, Franz, 2007. "Office Rent Determinants: A Hedonic Panel Analysis," MPRA Paper 11445, University Library of Munich, Germany.
    19. Schindler, Felix, 2009. "Volatilitätseffekte am US-amerikanischen Häusermarkt," ZEW Discussion Papers 09-048, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    20. Hong Miao & Sanjay Ramchander & Marc W. Simpson, 2011. "Return and Volatility Transmission in U.S. Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 39(4), pages 701-741, December.
    21. Riddel, Mary, 1999. "Fundamentals, Feedback Trading, and Housing Market Speculation: Evidence from California," Journal of Housing Economics, Elsevier, vol. 8(4), pages 272-284, December.
    22. Shu-hen Chiang, 2014. "Housing Markets in China and Policy Implications: Comovement or Ripple Effect," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(6), pages 103-120, November.
    23. Chang, Kuang-Liang, 2010. "House price dynamics, conditional higher-order moments, and density forecasts," Economic Modelling, Elsevier, vol. 27(5), pages 1029-1039, September.
    24. Mary Riddel, 2011. "Are Housing Bubbles Contagious? A Case Study of Las Vegas and Los Angeles Home Prices," Land Economics, University of Wisconsin Press, vol. 87(1), pages 126-144.
    25. Robert I. Webb & Jian Yang & Jin Zhang, 2016. "Price Jump Risk in the US Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 53(1), pages 29-49, July.

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