The Role of People’s Expectation in the Recent US Housing Boom and Bust

The Role of People’s Expectation in the Recent US Housing Boom and Bust This paper investigates how an important driver of the recent housing boom and bust, people’s expectation, influences housing asset returns. Specifically, it extends the volatility feedback model to study the relationship between housing volatility and asset returns during 19632007. The analysis considers two alternative breakpoints, 1984Q1 and 1999Q1, in order to distinguish the permanent structural break from temporary Markov-switching volatility. The novelty of this study lies in its insightful investigations into the recent U.S. housing boom and bust in the post-1999 period in four dimensions. First, the significantly negative volatility feedback effect in the housing market suggests a positive relationship between housing volatility and expected asset returns, and highly supports the important role of people’s expectations in the recent housing boom and bust. Second, the high-volatility regimes of the housing market delivered by this study indicate a strong association between housing cycles and business cycles, as well as a remarkable uncertainty in the U.S. housing market after the recession 2001. Third, the violated fundamental which refers to the broken negative relationship between housing volatility and realized asset returns during 2001–2004 implies the possible presence of a housing bubble during this period. Finally, volatility feedback anticipates the recent bubble-like housing market dynamics because high volatility during 2002–2003 implies low realized returns in the early housing-boom stage (2002–2003), as well as high expected returns in the second stage of the housing boom (2004–2005). http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

The Role of People’s Expectation in the Recent US Housing Boom and Bust

Loading next page...
 
/lp/springer_journal/the-role-of-people-s-expectation-in-the-recent-us-housing-boom-and-p0k0b0aTZ1
Publisher
Springer US
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Economics / Management Science; Regional/Spatial Science; Finance/Investment/Banking
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-011-9341-0
Publisher site
See Article on Publisher Site

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

Monthly Plan

  • Read unlimited articles
  • Personalized recommendations
  • No expiration
  • Print 20 pages per month
  • 20% off on PDF purchases
  • Organize your research
  • Get updates on your journals and topic searches

$49/month

Start Free Trial

14-day Free Trial

Best Deal — 39% off

Annual Plan

  • All the features of the Professional Plan, but for 39% off!
  • Billed annually
  • No expiration
  • For the normal price of 10 articles elsewhere, you get one full year of unlimited access to articles.

$588

$360/year

billed annually
Start Free Trial

14-day Free Trial