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Home Away From Home? Safe Haven Effects and London House Prices

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  • Ramadorai, Tarun
  • Badarinza, Cristian

Abstract

Historical time-series data is short relative to the frequency of political and economic crises. This makes it difficult to use pure time-series methods to identify the impacts of safe haven demand on asset prices, in the face of confounding effects from a wide range of alternative drivers. We present a new method to identify safe-haven effects which relies on combining the cross-section of asset prices with time-series measures of economic and political risk. We employ this strategy on large databases of historical housing transactions in London, and show that economic and political risk in Southern Europe, China, the Middle East, Russia, and South Asia is an important factor in explaining the dynamics of London house prices over the past two decades.

Suggested Citation

  • Ramadorai, Tarun & Badarinza, Cristian, 2013. "Home Away From Home? Safe Haven Effects and London House Prices," CEPR Discussion Papers 9786, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:9786
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    References listed on IDEAS

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    Cited by:

    1. Eraslan, Sercan, 2016. "Safe-haven demand for housing in London," Economic Modelling, Elsevier, vol. 58(C), pages 482-493.
    2. Peter A. Kemp, 2015. "Private Renting After the Global Financial Crisis," Housing Studies, Taylor & Francis Journals, vol. 30(4), pages 601-620, July.

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    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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