House Prices, Fundamentals and Bubbles
MetadataShow full item record
This paper studies actual (real) house prices relative to fundamental (real) house values. Such a focus is warranted since housing constitutes a large fraction of most household portfolios, and its characteristics are such that, in contrast to what prevails in financial markets, arbitrage will be limited and hence correction toward ‘true’ value is likely to be a prolonged process. Using UK data and a time-varying present value approach, our results preclude the existence of an explosive rational bubble due to non-fundamental factors. We further find that intrinsic bubbles have an important role to play in determining actual house prices although price dynamics appear to impact, particularly in periods of strong deviation from fundamental value. Price dynamics are found to be driven by momentum behaviour.
Showing items related by title, author, creator and subject.
Costello, Gregory; Fraser, Patricia; Groenewold, N. (2011)Using Australian capital city data from 1984Q3–2008Q2, this paper utilizes a dynamic present valuemodel within a VAR framework to construct time series of house prices depicting what aggregate houseprices should be given ...
Mardaneh, Elham (2010)Many industries are beginning to use innovative pricing techniques to improve inventory control, capacity utilisation, and ultimately the profit of the firm. In manufacturing, the coordination of pricing and production ...
Fraser, Patricia; Hoesli, M.; McAlevey, L. (2009)This paper specifies a two-variable system of house prices and income for N.Z., U.K. and the U.S., covering periods from 1973:4 through 2008:2. The analysis allows the identification of differences in house price-income ...