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Regime switches and permanent changes in impacts of housing risk factors on MSA‐level housing returns

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  • MeiChi Huang

Abstract

This study assesses impacts of housing risk factors on metropolitan housing excess returns in the augmented housing pricing model. Credit and liquidity factors represent demand and supply sides, respectively, of housing markets. All metropolitan statistical areas have significant regime switches, and booms and busts are turbulent and influenced by the two factors. The explanatory powers of the liquidity factor shrivel for the boom‐bust and regime‐switching volatility specifications, and excess housing returns are less sensitive to nationwide housing dynamics after 2008. This study lends support to time‐varying exposures of housing excess returns to risk factors in terms of temporary switches and permanent changes.

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  • MeiChi Huang, 2021. "Regime switches and permanent changes in impacts of housing risk factors on MSA‐level housing returns," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 310-342, January.
    • Handle: RePEc:wly:ijfiec:v:26:y:2021:i:1:p:310-342
    DOI: 10.1002/ijfe.1791
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