Home > Research > Publications & Outputs > Episodes of exuberance in housing markets

Electronic data

View graph of relations

Episodes of exuberance in housing markets: in search of the smoking gun

Research output: Working paper

Published

Standard

Episodes of exuberance in housing markets : in search of the smoking gun. / Pavlidis, Efthymios; Yusupova, Alisa; Paya, Ivan; Peel, David; Martinez-Garcia, Enrique; Mack, Adrienne; Crossman, Valerie.

Lancaster : Lancaster University, Department of Economics, 2014. (Economics Working Paper Series; Vol. 2014, No. 9).

Research output: Working paper

Harvard

Pavlidis, E, Yusupova, A, Paya, I, Peel, D, Martinez-Garcia, E, Mack, A & Crossman, V 2014 'Episodes of exuberance in housing markets: in search of the smoking gun' Economics Working Paper Series, no. 9, vol. 2014, Lancaster University, Department of Economics, Lancaster.

APA

Pavlidis, E., Yusupova, A., Paya, I., Peel, D., Martinez-Garcia, E., Mack, A., & Crossman, V. (2014). Episodes of exuberance in housing markets: in search of the smoking gun. (Economics Working Paper Series; Vol. 2014, No. 9). Lancaster University, Department of Economics.

Vancouver

Pavlidis E, Yusupova A, Paya I, Peel D, Martinez-Garcia E, Mack A et al. Episodes of exuberance in housing markets: in search of the smoking gun. Lancaster: Lancaster University, Department of Economics. 2014. (Economics Working Paper Series; 9).

Author

Pavlidis, Efthymios ; Yusupova, Alisa ; Paya, Ivan ; Peel, David ; Martinez-Garcia, Enrique ; Mack, Adrienne ; Crossman, Valerie. / Episodes of exuberance in housing markets : in search of the smoking gun. Lancaster : Lancaster University, Department of Economics, 2014. (Economics Working Paper Series; 9).

Bibtex

@techreport{9ba935180ebe44548c47b15a8e454ad5,
title = "Episodes of exuberance in housing markets: in search of the smoking gun",
abstract = "After a prolonged period characterized by rapid real appreciation in house prices, there is now broad recognition of the severe correction in housing markets that followed as one of the causes of the 2008-09 global recession. We investigate the time series characteristics of three relevant price indicators of the housing market --real house prices, price-to-income, and price-to-rent ratios-- for the U.S. and 21 other countries during the period 1975Q1-2013Q2 (see Mack and Mart{\'i}nez-Garc{\'i}a (2011)) for evidence of explosive behavior as a plausible explanation for the boom and bust. The empirical detection of explosive behavior in house prices provides a precise timeline as well as empirical content to the narrative connecting the evolution of housing markets to the global recession; our rich cross-country dataset offers a novel international perspective. For testing and detection, we adopt a pair of novel techniques based on a right-tail variation of the standard Augmented Dickey-Fuller (ADF) test --the supremum ADF (SADF) (Phillips et al. (2011)) and the generalized SADF (GSADF) (Phillips et al. (2012) and Phillips et al. (2013))-- where the alternative hypothesis is of a mildly explosive process (even periodically collapsing with the GSADF test) behavior within sample. Statistically significant periods of exuberance are found in most countries, with our empirical estimates suggesting an unprecedented synchronization across countries preceding the global recession. The boom in housing begins during the late 90s in the U.S. spreading to most countries by the early 2000s, until it bursts for most during 2007-08 as the impact on economic activity was being felt. In this regard, our findings corroborate the narrative of the 2008-09 global recession. In this paper, we also discuss more generally the use of these procedures to monitor international housing markets and as a warning signal.",
keywords = "House prices, 2008-09 Global Recession, Timeline, Unit-root Tests, Mildly Eexplosive Time Series, Sup ADF test, Generalized sup ADF test, Periodically Collapsing Bubbles",
author = "Efthymios Pavlidis and Alisa Yusupova and Ivan Paya and David Peel and Enrique Martinez-Garcia and Adrienne Mack and Valerie Crossman",
year = "2014",
language = "English",
series = "Economics Working Paper Series",
publisher = "Lancaster University, Department of Economics",
number = "9",
type = "WorkingPaper",
institution = "Lancaster University, Department of Economics",

}

RIS

TY - UNPB

T1 - Episodes of exuberance in housing markets

T2 - in search of the smoking gun

AU - Pavlidis, Efthymios

AU - Yusupova, Alisa

AU - Paya, Ivan

AU - Peel, David

AU - Martinez-Garcia, Enrique

AU - Mack, Adrienne

AU - Crossman, Valerie

PY - 2014

Y1 - 2014

N2 - After a prolonged period characterized by rapid real appreciation in house prices, there is now broad recognition of the severe correction in housing markets that followed as one of the causes of the 2008-09 global recession. We investigate the time series characteristics of three relevant price indicators of the housing market --real house prices, price-to-income, and price-to-rent ratios-- for the U.S. and 21 other countries during the period 1975Q1-2013Q2 (see Mack and Martínez-García (2011)) for evidence of explosive behavior as a plausible explanation for the boom and bust. The empirical detection of explosive behavior in house prices provides a precise timeline as well as empirical content to the narrative connecting the evolution of housing markets to the global recession; our rich cross-country dataset offers a novel international perspective. For testing and detection, we adopt a pair of novel techniques based on a right-tail variation of the standard Augmented Dickey-Fuller (ADF) test --the supremum ADF (SADF) (Phillips et al. (2011)) and the generalized SADF (GSADF) (Phillips et al. (2012) and Phillips et al. (2013))-- where the alternative hypothesis is of a mildly explosive process (even periodically collapsing with the GSADF test) behavior within sample. Statistically significant periods of exuberance are found in most countries, with our empirical estimates suggesting an unprecedented synchronization across countries preceding the global recession. The boom in housing begins during the late 90s in the U.S. spreading to most countries by the early 2000s, until it bursts for most during 2007-08 as the impact on economic activity was being felt. In this regard, our findings corroborate the narrative of the 2008-09 global recession. In this paper, we also discuss more generally the use of these procedures to monitor international housing markets and as a warning signal.

AB - After a prolonged period characterized by rapid real appreciation in house prices, there is now broad recognition of the severe correction in housing markets that followed as one of the causes of the 2008-09 global recession. We investigate the time series characteristics of three relevant price indicators of the housing market --real house prices, price-to-income, and price-to-rent ratios-- for the U.S. and 21 other countries during the period 1975Q1-2013Q2 (see Mack and Martínez-García (2011)) for evidence of explosive behavior as a plausible explanation for the boom and bust. The empirical detection of explosive behavior in house prices provides a precise timeline as well as empirical content to the narrative connecting the evolution of housing markets to the global recession; our rich cross-country dataset offers a novel international perspective. For testing and detection, we adopt a pair of novel techniques based on a right-tail variation of the standard Augmented Dickey-Fuller (ADF) test --the supremum ADF (SADF) (Phillips et al. (2011)) and the generalized SADF (GSADF) (Phillips et al. (2012) and Phillips et al. (2013))-- where the alternative hypothesis is of a mildly explosive process (even periodically collapsing with the GSADF test) behavior within sample. Statistically significant periods of exuberance are found in most countries, with our empirical estimates suggesting an unprecedented synchronization across countries preceding the global recession. The boom in housing begins during the late 90s in the U.S. spreading to most countries by the early 2000s, until it bursts for most during 2007-08 as the impact on economic activity was being felt. In this regard, our findings corroborate the narrative of the 2008-09 global recession. In this paper, we also discuss more generally the use of these procedures to monitor international housing markets and as a warning signal.

KW - House prices

KW - 2008-09 Global Recession

KW - Timeline

KW - Unit-root Tests

KW - Mildly Eexplosive Time Series

KW - Sup ADF test

KW - Generalized sup ADF test

KW - Periodically Collapsing Bubbles

M3 - Working paper

T3 - Economics Working Paper Series

BT - Episodes of exuberance in housing markets

PB - Lancaster University, Department of Economics

CY - Lancaster

ER -