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Testing for rational bubbles in the UK housing market

Author

Listed:
  • Xi Zhang
  • Renatas Kizys
  • Christos Floros
  • Konstantinos Gkillas
  • Mark E. Wohar

Abstract

Over the past decade, the UK has witnessed significant booms in the real estate market, and housing prices have experienced increases. Since 1997, the housing price has almost tripled, which is far beyond the long-term trend. To identify the existence of housing bubbles is a crucial issue for any country to prevent possible damage to economies and outbreaks of financial crises. The objective of this paper is to examine the existence of a housing price bubble in the UK through employing a co-explosive vector autoregression (VAR) model, originally applied to stock markets. The results demonstrate that both housing price and rental price show explosive behaviour during their growth, which provides little evidence to support the presence of real estate bubbles in the UK.

Suggested Citation

  • Xi Zhang & Renatas Kizys & Christos Floros & Konstantinos Gkillas & Mark E. Wohar, 2021. "Testing for rational bubbles in the UK housing market," Applied Economics, Taylor & Francis Journals, vol. 53(8), pages 962-975, February.
  • Handle: RePEc:taf:applec:v:53:y:2021:i:8:p:962-975
    DOI: 10.1080/00036846.2020.1820440
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    Cited by:

    1. Ozkan Haykir & Ibrahim Yagli, 2022. "Speculative bubbles and herding in cryptocurrencies," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-33, December.

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