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Testing Alternative Theories of the Property Price-Trading Volume Correlation

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  • Charles Leung
  • Garion Lau
  • Youngman Leong

Abstract

This article examines the correlation between the real housing price and trading volume. Contrary to the predictions of standard rational expectation models, a robust positive correlation between the two variables is identified. While no clear lead-lag relationship is found in the raw data, which is more consistent with the downpayment effect model, the medium-run component of the trading volume tends to lead (and Granger cause) the corresponding component of the property price, which is more consistent with the search theoretic model. An explanation for this difference in behavior is suggested and several future research directions are provided.

Suggested Citation

  • Charles Leung & Garion Lau & Youngman Leong, 2002. "Testing Alternative Theories of the Property Price-Trading Volume Correlation," Journal of Real Estate Research, Taylor & Francis Journals, vol. 23(3), pages 253-264, January.
    • Handle: RePEc:taf:rjerxx:v:23:y:2002:i:3:p:253-264
    DOI: 10.1080/10835547.2002.12091081
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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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