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Testing for Bubbles in Housing Markets: New Results Using a New Method

  • José Eduardo Gómez G.

    ()

  • Jair Ojeda Joya

    ()

  • Catalina Rey Guerra

    ()

  • Natalia Sicard

    ()

In the context of financial crises influenced by the development and burst of housing price bubbles, the detection of exuberant behaviors in the financial market and the implementation of early warning diagnosis tests are of vital importance. This paper applies the new method developed by Phillips et al (2012) for detecting bubbles in the Colombian residential property market. The empirical results suggest that currently the country could be experiencing a price bubble, when the CPI and the housing rent index are used as deflators. We do not check the robustness of these results to alternative deflators, such as a household income index and a land price index, due to the lack of monthly data on these indicators.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 753.

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Length: 11
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:bdr:borrec:753
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  1. Diba, Behzad T & Grossman, Herschel I, 1988. "Explosive Rational Bubbles in Stock Prices?," American Economic Review, American Economic Association, vol. 78(3), pages 520-30, June.
  2. Evans, George W, 1991. "Pitfalls in Testing for Explosive Bubbles in Asset Prices," American Economic Review, American Economic Association, vol. 81(4), pages 922-30, September.
  3. John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," Cowles Foundation Discussion Papers 785, Cowles Foundation for Research in Economics, Yale University.
  4. Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-36, June.
  5. West, Kenneth D, 1987. "A Specification Test for Speculative Bubbles," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 553-80, August.
  6. Peter C.B. PHILIPS & Yangru WU & Jun YU, 2009. "Explosive Behavior in the 1990s Nasdaq: When Did Exuberance Escalate Asset Values?," Working Papers 19-2009, Singapore Management University, School of Economics.
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