Dynamic Connectedness of UK Regional Property Prices

Antonakakis, Nikolaos and Chatziantoniou, Ioannis and Floros, Christos (2015): Dynamic Connectedness of UK Regional Property Prices.

Abstract

In this study we examine the network topology of UK regional property prices using a dynamic measure of connectedness developed by Diebold and Yilmaz (2014) over the period 1973Q4-2014Q4. Our findings suggest that the transmission of inter-regional property returns shocks is an important source of regional property return fluctuations in the UK. The UK regions of South West, Outer South East, East Midlands and Northern Ireland seem to be the dominant transmitters of property returns shocks throughout our sample period. Moreover, the results indicate that regional housing markets in the UK are highly interconnected and extreme-economic-event dependent. In addition, the dynamic framework of our analysis provides further insights regarding the ripple effect, while, emphasis is also placed on the fact that London may also act as a net recipient of shocks from other regions. Findings are important for policy makers purporting to alleviate regional imbalances and achieve balanced growth, as well as, investors who formulate portfolio diversification strategies. Our results exhibit robustness to a series of tests.

• Item Type: MPRA Paper
• Language: English
• Keywords: UK Housing Market Connectedness Vector Autoregression Variance Decomposition Ripple Effect
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; G - Financial Economics > G1 - General Financial Markets > G10 - General; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General

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