Zhang, Hanxiong, Hudson, Robert, Metcalf, Hugh and Manahov, Viktor (2015) Identification of house price bubbles using user cost in a state space model. Applied Economics, 47 (56). pp. 6088-6101. ISSN 0003-6846
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| Item Type: | Article |
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| Item Status: | Live Archive |
Abstract
This article studies how much variation in house prices results from nonfundamental factors. We propose a relative valuation approach to quantifying a bubble in housing by incorporating the housing User Cost into a state space model. We find that UK house prices were undervalued from January 1995 to May 2001 and subsequently moved into a bubble over the period to October 2012. Our results support the bounded rationality hypothesis in the long run. However, we also find that the irrational and the rational expectation hypotheses can coexist in the short run when explosive bubbles are driven by price dynamics.
| Keywords: | house price bubbles, expectation hypotheses, bmjconvert, NotOAChecked |
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| Subjects: | L Social studies > L100 Economics |
| Divisions: | Lincoln International Business School |
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| ID Code: | 18843 |
| Deposited On: | 25 Sep 2015 02:16 |
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