Financial Crisis and the Comovements of Housing Sub-markets: Do relationships change after a crisis?

Leung, Charles Ka Yui and CHEUNG, W. Y. Patrick and TANG, C. H. Edward (2011): Financial Crisis and the Comovements of Housing Sub-markets: Do relationships change after a crisis?

Abstract

This study of the co-movements of the transaction prices and trading volumes reveal that the mean correlation of prices, and trading volumes alike, among different housing sub-markets increases during the market boom. After a financial crisis, the correlations drop dramatically and stay low. The distribution of the correlations changes from skewed to symmetric. All these coincide with the increase in the total variance of prices, as well as the share of the idiosyncratic component in the total variance after the crisis. These findings are consistent to a family of theories which emphasize on “regime switch” in expectation.

• Item Type: MPRA Paper
• Language: English
• Keywords: financial crisis; hedonic pricing; structural break; evolution of valuation; rolling regression
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R30 - General; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R20 - General; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General; G - Financial Economics > G1 - General Financial Markets > G10 - General

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