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Do Malaysian house prices follow a random walk? Evidence from univariate and panel LM unit root tests with one and two structural breaks

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  • Hooi Hooi Lean
  • Russell Smyth

Abstract

In this article we apply univariate and panel Lagrange Multiplier (LM) unit root tests with one and twostructural breaks proposed by Lee and Strazicich (2003, 2004) and Im et al . (2005) to examine housing prices for five different housing price indices (all housing, detached housing, semi-detached housing, terrace housing and high-rise housing) in 14 states of Malaysia to test whether housing prices exhibit a random walk. Our main finding from the univariate LM unit root tests is that for the vast majority of states housing prices follow a stationary process about a segmented trend. The results of the panel LM unit root tests provide overwhelming evidence that house prices are segmented trend reverting.

Suggested Citation

  • Hooi Hooi Lean & Russell Smyth, 2013. "Do Malaysian house prices follow a random walk? Evidence from univariate and panel LM unit root tests with one and two structural breaks," Applied Economics, Taylor & Francis Journals, vol. 45(18), pages 2611-2627, June.
    • Handle: RePEc:taf:applec:v:45:y:2013:i:18:p:2611-2627
    DOI: 10.1080/00036846.2012.674207
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    References listed on IDEAS

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    1. Junsoo Lee & Mark C. Strazicich, 2013. "Minimum LM unit root test with one structural break," Economics Bulletin, AccessEcon, vol. 33(4), pages 2483-2492.
    2. Robert J. Shiller, 2007. "Understanding recent trends in house prices and homeownership," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 89-123.
    3. Robert J. Shiller, 2007. "Understanding recent trends in house prices and homeownership," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 89-123.
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    Cited by:

    1. Lean, Hooi Hooi & Smyth, Russell, 2014. "Are shocks to disaggregated energy consumption in Malaysia permanent or temporary? Evidence from LM unit root tests with structural breaks," Renewable and Sustainable Energy Reviews, Elsevier, vol. 31(C), pages 319-328.
    2. Lean, Hooi Hooi & Smyth, Russell, 2014. "Disaggregated energy demand by fuel type and economic growth in Malaysia," Applied Energy, Elsevier, vol. 132(C), pages 168-177.
    3. Le, Thai-Ha, 2015. "Do soaring global oil prices heat up the housing market? Evidence from Malaysia," Economics Discussion Papers 2015-8, Kiel Institute for the World Economy (IfW Kiel).
    4. Le, Thai-Ha, 2015. "Do soaring global oil prices heat up the housing market? Evidence from Malaysia," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 9, pages 1-30.
    5. Luis A. Gil-Alana & Rangan Gupta & Fernando Perez de Gracia, 2016. "Persistence, mean reversion and non-linearities in the US housing prices over 1830--2013," Applied Economics, Taylor & Francis Journals, vol. 48(34), pages 3244-3252, July.
    6. Janesh Sami, 2020. "Time Series Dynamics of Sugar Export Earnings in Fiji with Multiple Endogenous Structural Breaks: Implications for EU Sugar and Industry Reforms," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(1), pages 169-189, March.

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