House Prices, Fundamentals and Bubbles
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 li...
| Main Authors: | , , |
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| Format: | Journal Article |
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Wiley Blackwell
2006
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| Online Access: | http://hdl.handle.net/20.500.11937/3321 |
| _version_ | 1848744199411728384 |
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| author | Black, A. Fraser, Patricia Hoesli, M. |
| author_facet | Black, A. Fraser, Patricia Hoesli, M. |
| author_sort | Black, A. |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | 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. |
| first_indexed | 2025-11-14T05:57:40Z |
| format | Journal Article |
| id | curtin-20.500.11937-3321 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T05:57:40Z |
| publishDate | 2006 |
| publisher | Wiley Blackwell |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-33212017-09-13T14:45:49Z House Prices, Fundamentals and Bubbles Black, A. Fraser, Patricia Hoesli, M. fundamentals present value bubbles time-varying risk Real house prices real disposable income 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. 2006 Journal Article http://hdl.handle.net/20.500.11937/3321 10.1111/j.1468-5957.2006.00638.x Wiley Blackwell restricted |
| spellingShingle | fundamentals present value bubbles time-varying risk Real house prices real disposable income Black, A. Fraser, Patricia Hoesli, M. House Prices, Fundamentals and Bubbles |
| title | House Prices, Fundamentals and Bubbles |
| title_full | House Prices, Fundamentals and Bubbles |
| title_fullStr | House Prices, Fundamentals and Bubbles |
| title_full_unstemmed | House Prices, Fundamentals and Bubbles |
| title_short | House Prices, Fundamentals and Bubbles |
| title_sort | house prices, fundamentals and bubbles |
| topic | fundamentals present value bubbles time-varying risk Real house prices real disposable income |
| url | http://hdl.handle.net/20.500.11937/3321 |