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What drives Hong Kong's residential property market—A Markov switching present value model

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  • Xiao, Qin

Abstract

The property market of Hong Kong is one of the most volatile in the world. This study attempts to investigate the proposition that the Hong Kong residential market is only driven by fundamentals. The investigation is based on a Markov switching present value model, which explicitly accounts for a rational speculative bubble. The estimates show that not only does the model capture the asymmetric market responses to information and noise, but it also gives evidence on investor heterogeneity. The study also finds that the influence of the rational bubble is statistically significant.

Suggested Citation

  • Xiao, Qin, 2007. "What drives Hong Kong's residential property market—A Markov switching present value model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 383(1), pages 108-114.
    • Handle: RePEc:eee:phsmap:v:383:y:2007:i:1:p:108-114
    DOI: 10.1016/j.physa.2007.04.092
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    Citations

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    Cited by:

    1. Nneji, Ogonna & Brooks, Chris & Ward, Charles W.R., 2013. "House price dynamics and their reaction to macroeconomic changes," Economic Modelling, Elsevier, vol. 32(C), pages 172-178.
    2. Gary John Rangel & Jason Wei Jian Ng, 2017. "Macroeconomic Drivers of Singapore Private Residential Prices: A Markov-Switching Approach," Capital Markets Review, Malaysian Finance Association, vol. 25(2), pages 15-31.
    3. Chevallier, Julien, 2011. "Evaluating the carbon-macroeconomy relationship: Evidence from threshold vector error-correction and Markov-switching VAR models," Economic Modelling, Elsevier, vol. 28(6), pages 2634-2656.
    4. Mohamad, Shaifulfazlee & Masih, Mansur, 2017. "What drives the property prices ? the Malaysian case," MPRA Paper 102411, University Library of Munich, Germany.

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