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Housing prices and investor sentiment dynamics: Evidence from China using a wavelet approach

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  • Hong, Yun
  • Li, Yi

Abstract

This paper investigates the multiscale relation between housing prices and investor sentiment in China by employing the wavelet method. We document significant positive correlations between the raw and decomposed series at all levels using the DCC-GARCH model. The wavelet Granger casual test and wavelet coherence analysis reveal long-term “interdependence” among long-term investors. In addition, for medium-term investors, housing is dominant and leads investor sentiment, while investor sentiment is dominant for short-term investors. Furthermore, the correlation between housing prices and investor sentiment is more pronounced in regions with higher levels of economic development.

Suggested Citation

  • Hong, Yun & Li, Yi, 2020. "Housing prices and investor sentiment dynamics: Evidence from China using a wavelet approach," Finance Research Letters, Elsevier, vol. 35(C).
    • Handle: RePEc:eee:finlet:v:35:y:2020:i:c:s1544612319304908
    DOI: 10.1016/j.frl.2019.09.015
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    Cited by:

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    2. Lee, Hung-Wei & Lin, Che-Chun & Tsai, I-Chun, 2023. "Another application of call options: Explaining the divergence between the housing market and the rental market," Finance Research Letters, Elsevier, vol. 53(C).
    3. José Almeida & Tiago Cruz Gonçalves, 2022. "A Systematic Literature Review of Volatility and Risk Management on Cryptocurrency Investment: A Methodological Point of View," Risks, MDPI, vol. 10(5), pages 1-18, May.
    4. Al Refai, Hisham & Eissa, Mohamad Abdelaziz & Zeitun, Rami, 2021. "The dynamics of the relationship between real estate and stock markets in an energy-based economy: The case of Qatar," The Journal of Economic Asymmetries, Elsevier, vol. 23(C).
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    6. José-Francisco Vergara-Perucich, 2022. "Is There Financialization of Housing Prices? Empirical Evidence from Santiago de Chile," Economies, MDPI, vol. 10(6), pages 1-14, May.
    7. Ling Li & Wayne Xinwei Wan & Shenjing He, 2021. "The Heightened ‘Security Zone’ Function of Gated Communities during the COVID-19 Pandemic and the Changing Housing Market Dynamic: Evidence from Beijing, China," Land, MDPI, vol. 10(9), pages 1-21, September.

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    More about this item

    Keywords

    Housing prices; Investor sentiment; Wavelet method; DCC-GARCH model;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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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