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Housing Prices and the Role of Speculation: The Case of Seoul

Author

Listed:
  • Park, Donghyun

    (Asian Development Bank)

  • Xiao, Qin

    (University of Aberdeen)

Abstract

Between June 1998 and March 2006, the price index of apartment housing in Seoul, Republic of Korea, more than doubled, while fundamentals such as gross domestic product, wage, and population increased by less than 35%. This study examines the role of a rational speculative bubble in this price surge. We find that unobservable information explains part of the price volatility, and that a rational bubble proxy is a significant driver of prices. However, neither latent information nor rational bubble is enough to explain the recent housing price appreciation, even in conjunction with observable fundamentals.

Suggested Citation

  • Park, Donghyun & Xiao, Qin, 2009. "Housing Prices and the Role of Speculation: The Case of Seoul," ADB Economics Working Paper Series 146, Asian Development Bank.
  • Handle: RePEc:ris:adbewp:0146
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Speculative bubble; latent information; housing market;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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