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Housing market sentiment and intervention effectiveness: Evidence from China

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  • Zhou, Zhengyi

Abstract

This paper studies the interaction between housing market sentiment and government interventions. With a unique micro-level data from China, we construct a housing market sentiment index by applying the techniques in the finance literature. This index is significantly correlated with the confidence indexes from official sources. We find that housing market returns increase with contemporaneous sentiment, and high sentiment is followed by low returns. Tightening policies cannot reduce optimism, and high sentiment negatively impacts the effectiveness of tightening policies. This negative impact is especially significant in the zones where housing prices are sensitive to increasing sentiment.

Suggested Citation

  • Zhou, Zhengyi, 2018. "Housing market sentiment and intervention effectiveness: Evidence from China," Emerging Markets Review, Elsevier, vol. 35(C), pages 91-110.
  • Handle: RePEc:eee:ememar:v:35:y:2018:i:c:p:91-110
    DOI: 10.1016/j.ememar.2017.12.005
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    Keywords

    Housing market; Sentiment; Government intervention; China; Shanghai;

    JEL classification:

    • P25 - Economic Systems - - Socialist Systems and Transition Economies - - - Urban, Rural, and Regional Economics
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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