IDEAS home Printed from https://ideas.repec.org/a/vrs/remava/v31y2023i2p1-17n6.html
   My bibliography  Save this article

The Impact of Investor Sentiment on Housing Prices and the Property Stock Index Volatility in South Africa

Author

Listed:
  • Muzindutsi Paul-Francois

    (School of Accounting, Economics and Finance, University of KwaZulu-Natal, University Road, Westville Bag X 5400, Durban 4000, South Africa)

  • Apau Richard

    (School of Accounting, Economics and Finance, University of KwaZulu-Natal, University Road, Westville Bag X 5400, Durban 4000, South Africa)

  • Muguto Lorraine

    (School of Accounting, Economics and Finance, University of KwaZulu-Natal, University Road, Westville Bag X 5400, Durban 4000, South Africa)

  • Muguto Hilary Tinotenda

    (School of Accounting, Economics and Finance, University of KwaZulu-Natal, University Road, Westville Bag X 5400, Durban 4000, South Africa)

Abstract

While prior studies have examined the predictive effect of macroeconomic and country risk components on property stock index dynamics, limited explanations exist in the literature regarding the time-varying effect of investor sentiment on housing prices. Accordingly, this study assesses the impact of investor sentiment on housing properties’ returns and the effect of investor sentiment on the conditional volatility of housing price indices under different market conditions, using GARCH, GJR-GARCH, E-GARCH and Markov-switching VAR models. We found investor sentiment to significantly impact the risk premium of the property returns, where property returns increased with positive changes in investor sentiment, and conditional volatility of property returns decreased with the same changes in investor sentiment. Investor sentiment exerts positive predictive influences on the prices of small and medium houses, in both bullish and bearish market conditions but does not affect the large housing market segment. This makes the implementation of risk-related diversification across small and medium real estate portfolios more effective than large real estate portfolios. Our findings show that investor sentiment is a plausible driver of mass investor redemption actions under conditions of uncertainty.

Suggested Citation

  • Muzindutsi Paul-Francois & Apau Richard & Muguto Lorraine & Muguto Hilary Tinotenda, 2023. "The Impact of Investor Sentiment on Housing Prices and the Property Stock Index Volatility in South Africa," Real Estate Management and Valuation, Sciendo, vol. 31(2), pages 1-17, June.
    • Handle: RePEc:vrs:remava:v:31:y:2023:i:2:p:1-17:n:6
    DOI: 10.2478/remav-2023-0009
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/remav-2023-0009
    Download Restriction: no
    File URL: https://libkey.io/10.2478/remav-2023-0009?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
    ---><---

    More about this item

    Keywords

    housing prices; property index; investor sentiment; ADCCGARCH; MS-VAR;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G40 - Financial Economics - - Behavioral Finance - - - General

    Statistics

    Access and download statistics

    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:vrs:remava:v:31:y:2023:i:2:p:1-17:n:6. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    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.