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Anticipated vs. Unanticipated House Price Movements and Transaction Volume

Author

Listed:
  • Yavuz Arslan
  • Birol Kanik
  • Bulent Koksal

Abstract

Using data from England and Wales, we analyze the relationship between house prices and transaction volume (number of houses sold) and find that there is a negative relationship. When we decompose price changes into anticipated and unanticipated components we find that while anticipated house price changes positively affect transaction volume, unanticipated price changes have a negative effect. These findings give insights for the theories which try to explain the relationship between house prices and transaction volume. Our findings are inconsistent with the 'down-payment effect' approach developed by Stein (1995) and Ortalo-Magne and Rady (2006), and with the 'loss aversion behavior' approach discussed by Genesove and Mayer (2001). However, our results support the evidence of asymmetric decisions on the buyer and seller side documented in Case and Shiller (1988) and partially support the mechanisms in search and matching models.

Suggested Citation

  • Yavuz Arslan & Birol Kanik & Bulent Koksal, 2015. "Anticipated vs. Unanticipated House Price Movements and Transaction Volume," Working Papers 1511, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:1511
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2015/15-11
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    Cited by:

    1. Wang, Kaiyang & Yang, Haizhen, 2018. "The price-volume relationship caused by asset allocation based on Kelly criterion," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 503(C), pages 1-8.
    2. Luca Agnello & Vitor Castro & Ricardo M. Sousa, 2020. "The Housing Cycle: What Role for Mortgage Market Development and Housing Finance?," The Journal of Real Estate Finance and Economics, Springer, vol. 61(4), pages 607-670, November.
    3. Doszyń Mariusz & Gnat Sebastian, 2017. "Econometric Identification of the Impact of Real Estate Characteristics Based on Predictive and Studentized Residuals," Real Estate Management and Valuation, Sciendo, vol. 25(1), pages 84-92, March.

    More about this item

    Keywords

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    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G1 - Financial Economics - - General Financial Markets
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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