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Housing market sentiment and intervention effectiveness: Evidence from China

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  • Zhou, Zhengyi

Abstract

This paper studies the interaction between housing market sentiment and government interventions. With a unique micro-level data from China, we construct a housing market sentiment index by applying the techniques in the finance literature. This index is significantly correlated with the confidence indexes from official sources. We find that housing market returns increase with contemporaneous sentiment, and high sentiment is followed by low returns. Tightening policies cannot reduce optimism, and high sentiment negatively impacts the effectiveness of tightening policies. This negative impact is especially significant in the zones where housing prices are sensitive to increasing sentiment.

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  • Zhou, Zhengyi, 2018. "Housing market sentiment and intervention effectiveness: Evidence from China," Emerging Markets Review, Elsevier, vol. 35(C), pages 91-110.
    • Handle: RePEc:eee:ememar:v:35:y:2018:i:c:p:91-110
    DOI: 10.1016/j.ememar.2017.12.005
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    2. Zhong, Changbiao & Xie, Lijuan & Shi, Yu & Xu, Xiangyun, 2023. "Macro-prudential policy, its alignment with monetary policy and house price growth: A cross-country study," The Quarterly Review of Economics and Finance, Elsevier, vol. 90(C), pages 51-62.
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    More about this item

    Keywords

    Housing market; Sentiment; Government intervention; China; Shanghai;
    All these keywords.

    JEL classification:

    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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