IDEAS home Printed from https://ideas.repec.org/a/taf/irapec/v24y2010i4p437-452.html
   My bibliography  Save this article

Bubbles in UK house prices: evidence from ESTR models

Author

Listed:
  • David McMillan
  • Alan Speight

Abstract

Recent movements in stock and house prices have led to an examination of the presence of bubbles. Whilst, there is extensive research on stock price data, there is relatively less for house prices. This paper uses a present-value model for house prices to test for the presence of bubbles. The results support the presence of a non-fundamental component within UK national and regional house prices. In particular, for the majority of series considered, evidence is presented of linear non-stationarity within the fundamental present-value relationship, and of non-linear stationarity, implying the presence of a non-fundamental, or bubble, component. Furthermore, evidence is presented that prices adjust quicker when they are below fundamental equilibrium, than when they are above fundamental equilibrium, i.e. there is downward price stickiness. These results support the hypothesis that house price dynamics can be characterised by price-to-price momentum. Finally, forecast evidence suggests that real prices are likely to adjust downwards and converge with fundamental value.

Suggested Citation

  • David McMillan & Alan Speight, 2010. "Bubbles in UK house prices: evidence from ESTR models," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(4), pages 437-452.
    • Handle: RePEc:taf:irapec:v:24:y:2010:i:4:p:437-452
    DOI: 10.1080/02692171.2010.483785
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/02692171.2010.483785
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/02692171.2010.483785?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Montagnoli, Alberto & Nagayasu, Jun, 2015. "UK house price convergence clubs and spillovers," Journal of Housing Economics, Elsevier, vol. 30(C), pages 50-58.
    2. Xie, Zixiong & Chen, Shyh-Wei & Wu, An-Chi, 2019. "Asymmetric adjustment, non-linearity and housing price bubbles: New international evidence," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    3. Alberto Montagnoli & Jun Nagaysu, 2013. "An investigation of housing affordability in the UK regions," Working Papers 1316, University of Strathclyde Business School, Department of Economics.
    4. Hsiao-Jung Teng & Chin-Oh Chang & Ming-Chi Chen, 2017. "Housing bubble contagion from city centre to suburbs," Urban Studies, Urban Studies Journal Limited, vol. 54(6), pages 1463-1481, May.
    5. Nagayasu, Jun, 2016. "Inflation and Bubbles in the Japanese Condominium Market," MPRA Paper 71192, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christiane Goodfellow & Dirk Schiereck & Steffen Wippler, 2013. "Are behavioural finance equity funds a superior investment? A note on fund performance and market efficiency," Journal of Asset Management, Palgrave Macmillan, vol. 14(2), pages 111-119, April.
    2. R. Andergassen, 2003. "Rational destabilising speculation and the riding of bubbles," Working Papers 475, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. Kubin, Ingrid & Zörner, Thomas O. & Gardini, Laura & Commendatore, Pasquale, 2019. "A credit cycle model with market sentiments," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 159-174.
    4. Ariane Szafarz, 2015. "Market Efficiency and Crises:Don’t Throw the Baby out with the Bathwater," Bankers, Markets & Investors, ESKA Publishing, issue 139, pages 20-26, November-.
    5. David G. McMillan, 2010. "Present Value Model, Bubbles and Returns Predictability: Sector‐Level Evidence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(5‐6), pages 668-686, June.
    6. Berna Karali & Scott H. Irwin & Olga Isengildina‐Massa, 2020. "Supply Fundamentals and Grain Futures Price Movements," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(2), pages 548-568, March.
    7. Rodríguez, Mª Araceli, 2005. "Nueva Evidencia Empírica sobre las Turbulencias Cambiarias de la Peseta Española. 1989-1998/New Evidence about Turbulences on the Spanish Peseta. 1989-1998s," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 23, pages 207-230, Abril.
    8. David Peón & Anxo Calvo, 2012. "Using Behavioral Economics to Analyze Credit Policies in the Banking Industry," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 145-160.
    9. Kumar, Alok, 2007. "Do the diversification choices of individual investors influence stock returns?," Journal of Financial Markets, Elsevier, vol. 10(4), pages 362-390, November.
    10. Stijn Claessens & M. Ayhan Kose, 2013. "Financial Crises: Explanations, Types and Implications," CAMA Working Papers 2013-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    11. Mohamed KHALED, 2018. "apport du biais d’excès de confiance à l’explication de la volatilité des rendements du marché des actions algérien," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 9(2), pages 36-46, December.
    12. Randall Morck & Lloyd Steier, 2005. "The Global History of Corporate Governance: An Introduction," NBER Chapters, in: A History of Corporate Governance around the World: Family Business Groups to Professional Managers, pages 1-64, National Bureau of Economic Research, Inc.
    13. Ahmad Fraz & Arshad Hassan, 2017. "Stock Price Synchronicity and Information Environment," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(4), pages 213-232, December.
    14. Stefano DellaVigna & Joshua M. Pollet, 2005. "Attention, Demographics, and the Stock Market," NBER Working Papers 11211, National Bureau of Economic Research, Inc.
    15. Alexander S. Sangare, 2005. "Efficience des marchés : un siècle après Bachelier," Revue d'Économie Financière, Programme National Persée, vol. 81(4), pages 107-132.
    16. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    17. Brock, William A. & Hommes, Cars H. & Wagener, Florian O. O., 2005. "Evolutionary dynamics in markets with many trader types," Journal of Mathematical Economics, Elsevier, vol. 41(1-2), pages 7-42, February.
    18. Alexandros Kontonikas & Alexandros Kostakis, 2013. "On Monetary Policy and Stock Market Anomalies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 40(7-8), pages 1009-1042, September.
    19. A. Corcos & J-P Eckmann & A. Malaspinas & Y. Malevergne & D. Sornette, 2002. "Imitation and contrarian behaviour: hyperbolic bubbles, crashes and chaos," Quantitative Finance, Taylor & Francis Journals, vol. 2(4), pages 264-281.
    20. Abdul Hamid Habbe, 2017. "Estimation Error of Earnings Information: A Test of Representativeness and Anchoring-adjustment Heuristic," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 224-233.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:irapec:v:24:y:2010:i:4:p:437-452. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIRA20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.