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Financial Crisis and the Co-movements of Housing Sub-markets: Do relationships change after a crisis?

  • Charles Ka Yui Leung

    ()

    (Associate Professor, Department of Economics and Finance, City University of Hong Kong; Address: 83 Tat Chee Avenue, Kowloon Tong, Hong Kong; Phone: (852) 3442-9604; Fax: (852) 3442-0284)

  • Patrick Wai Yin Cheung

    ()

    (Research Associate, Department of Economics and Finance, City University of Hong Kong; Address: 83 Tat Chee Avenue, Kowloon Tong, Hong Kong)

  • Edward Chi Ho Tang

    ()

    (PhD Candidate, Department of Economics and Finance, City University of Hong Kong; Address: 83 Tat Chee Avenue, Kowloon Tong, Hong Kong)

This study of the co-movements of transaction prices and trading volumes reveals that the mean correlation of prices and trading volumes alike, among different housing sub-markets, increase during the market boom. After a financial crisis, the correlations dramatically drop and stay low. The distribution of the correlations changes from skewed to symmetric. All these coincide with the increase in the total variance of prices, as well as the share of the idiosyncratic component in the total variance after the crisis. These findings are consistent with a family of theories that emphasize on the ¡§regime switch¡¨ in expectations.

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Article provided by Asian Real Estate Society in its journal International Real Estate Review.

Volume (Year): 16 (2013)
Issue (Month): 1 ()
Pages: 68-118

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Handle: RePEc:ire:issued:v:16:n:01:2013:p:68-118
Contact details of provider: Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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