Controlling for transactions bias in regional house price indices

Transactions bias arises when properties that trade are not a random sample of the total housing stock. Price indices are susceptible because they are typically based on transactions data. Existing approaches to this problem rely on Heckman-type correction methods, where a probit regression is used to capture the differences between properties that sell and those that do not sell in a given period. However, this approach can only be applied where there is reliable data on the whole housing stock. In many countries—the UK included—no such data exist and there is little prospect of correcting for transactions bias in any of the regularly updated mainstream house price indices. Thispaper suggests a possible alternative approach, using information at postcode sector level and Fractional Probit Regression to correct for transactions bias in hedonic price indices based on one and a half million house sales from 1996 to 2004, distributed across 1200 postcode sectors in the South East of England

UK Housing Market: Time Series Processes with Independent and Identically Distributed Residuals

The paper examines whether a univariate data generating process can be identified which explains the data by having residuals that are independent and identically distributed, as verified by the BDS test. The stationary first differenced natural log quarterly house price index is regressed, initially with a constant variance and then with a conditional variance. The only regression function that produces independent and identically distributed standardised residuals is a mean process based on a pure random walk format with Exponential GARCH in mean for the conditional variance. There is an indication of an asymmetric volatility feedback effect but higher frequency data is required to confirm this. There could be scope for forecasting the index but this is tempered by the reduction in the power of the BDS test if there is a non-linear conditional variance process

Spatial housing economics: a survey

This introduction to the Virtual Special Issue surveys the development of spatial housing economics from its roots in neo-classical theory, through more recent developments in social interactions modelling, and touching on the role of institutions, path dependence and economic history. The survey also points to some of the more promising future directions for the subject that are beginning to appear in the literature. The survey covers elements hedonic models, spatial econometrics, neighbourhood models, housing market areas, housing supply, models of segregation, migration, housing tenure, sub-national house price modelling including the so-called ripple effect, and agent-based models. Possible future directions are set in the context of a selection of recent papers that have appeared in Urban Studies. Nevertheless, there are still important gaps in the literature that merit further attention, arising at least partly from emerging policy problems. These include more research on housing and biodiversity, the relationship between housing and civil unrest, the effects of changing age distributions - notably housing for the elderly - and the impact of different international institutional structures. Methodologically, developments in Big Data provide an exciting framework for future work

Systemic Risk and the Ripple Effect in the Supply Chain

Supply chains are highly complex systems, and disruptions may ripple through these systems in unexpected ways, but they may also start in unexpected ways. We investigate the causes of ripple effect through the lens of systemic risk. We derive supply chain systemic risk from the finance discipline where sources of risk are found in systemic risk-taking, contagion, and amplification mechanisms. In a supply chain context, we identify three dimensions that influence systemic risk, the nature of a disruption, the structure, and dependency of the supply chain, and the decision-making. Within these three dimensions, there are several factors including correlation of risk, compounding effects, cyclical linkages, counterparty risk, herding behavior, and misaligned incentives. These factors are often invisible to decision makers, and they may operate in tandem to exacerbate ripple effect. We highlight these systemic risks, and we encourage further research to understand their nature and to mitigate their effect

Urban heritages: how history and housing finance matter to housing form and homeownership rates

Contemporary Western cities are not uniform but display a variety of different housing forms and tenures, both between and within countries. We distinguish three general city types in this paper: low rise, single-family dwelling cities where owner-occupation is the most prevalent tenure form; multi-dwelling building cities where tenants comprise the majority and; multi-dwelling building cities where owner occupation is the principal tenure form. We argue that historical developments beginning in the nineteenth century are crucial to understanding this diversity in urban form and tenure composition across Western cities. Our path-dependent argument is twofold. First, we claim that different housing finance institutions engendered different forms of urban development during the late-nineteenth century and had helped to establish the difference between single-family dwelling cities and multi-dwelling building cities by 1914. Second, rather than stemming from countries’ welfare systems or ‘variety of capitalism’, we argue that these historical distinctions have a significant and enduring impact on today’s urban housing forms and tenures. Our argument is supported by a unique collection of data of 1095 historical cities across 27 countries

Further evidence on the (in-) efficiency of the U.S. housing market

Extending the controversial findings from relevant literature on testing the efficient market hypothesis for the U.S. housing market, the results from the monthly and quarterly transaction-based Case-Shiller indices from 1987 to 2009 provide further empirical evidence on the rejection of the weak-form version of efficiency in the U.S. housing market. In addition to conducting parametric and non-parametric tests, we apply technical trading strategies to test whether or not the inefficiencies can be exploited by investors earning excess returns. The empirical findings suggest that investors might be able to obtain excess returns from both autocorrelation- and moving average-based trading strategies compared to a buy-and-hold strategy

Spatio-temporal diffusion of residential land prices across Taipei regions

ABSTRACT: Past studies have shown that changes in the house price of a region may transmit to its neighbouring regions. The transmission mechanism may follow spatial and temporal diffusion processes. This paper investigates such regional housing market dynamics and interactions among local housing sub-markets in Taipei. The analysis is based on a panel data framework and spatial panel models using annual data on median residential land prices from 41 Taipei sub-markets over the period from 1992 to 2010. The empirical analysis suggests that spatial dependence plays a significant role in interactions among regional housing markets. The results are strongly robust across several model specifications and regions controlling for time fixed effects and space-time covariance. These findings have significant implications for urban spatial planning and efficient use of public resources in mega-urban areas. JEL CLASSIFICATIONS: C21; C23; R12; H5