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The Q Theory of Housing Investment

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  • Jud, G Donald
  • Winkler, Daniel T

Abstract

This paper presents estimates of a Q model of housing investment, using quarterly data for the United States. The empirical model is estimated using building permits, housing starts, and housing investment expenditures as measures of investment. The current and lagged values of the Q ratio are found to be positively and significantly associated with housing investment, whichever way investment is measured. The findings suggest that the housing market indeed functions as Tobin has theorized. Housing suppliers appear to respond to the demands of housing consumers, building more new homes when existing home prices are high relative to new home prices. Copyright 2003 by Kluwer Academic Publishers

Suggested Citation

  • Jud, G Donald & Winkler, Daniel T, 2003. "The Q Theory of Housing Investment," The Journal of Real Estate Finance and Economics, Springer, vol. 27(3), pages 379-392, November.
    • Handle: RePEc:kap:jrefec:v:27:y:2003:i:3:p:379-92
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    Citations

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    Cited by:

    1. Geoff Willcocks, 2009. "UK Housing Market: Time Series Processes with Independent and Identically Distributed Residuals," The Journal of Real Estate Finance and Economics, Springer, vol. 39(4), pages 403-414, November.
    2. Carlos Cañizares Martínez & Gabe J. de Bondt & Arne Gieseck, 2023. "Forecasting housing investment," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(3), pages 543-565, April.
    3. repec:zbw:bofrdp:2017_026 is not listed on IDEAS
    4. Rainer Schulz & Axel Werwatz, 2008. "House Prices and Replacement Cost: A Micro-Level Analysis," SFB 649 Discussion Papers SFB649DP2008-013, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    5. Verona, Fabio, 2017. "Q, investment, and the financial cycle," Bank of Finland Research Discussion Papers 26/2017, Bank of Finland.
    6. Verona, Fabio, 2017. "Q, investment, and the financial cycle," Research Discussion Papers 26/2017, Bank of Finland.

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