Exuberance, Bubbles or Froth? Some Historical Results using Long Run House Price Data for Amsterdam, Norway and Paris

Yang Hu and Les Oxley

Working Papers in Economics from University of Waikato

Abstract: It has been argued that house prices may exhibit a period of bubbles and that they may also be either a cause or an effect of, for example, the Global Financial Crisis (GFC). In this paper, we test econometrically whether house price bubbles have historical precedents and also whether contagion from other financial crises are mirrored in these housing markets. We apply the generalized sup ADF (GSADF) test based procedure of Phillips, Shi, and Yu (2015a) to test for the evidence of exuberance or bubbles in historical housing price indices for the Herengracht index of Amsterdam (1649-2010), Norway (1819-2014) and Paris (1650-2012) based upon the right-tailed unit root null hypothesis with or without an intercept. We find, firstly, there is little evidence of exuberance in the real Herengracht index or of bubbles in the house price-rent ratio for Amsterdam. Secondly, our empirical results provide evidence of exuberance in Norwegian house prices where our identified episodes coincide with the major financial crisis in Norwegian history. Thirdly, no significant evidence of exuberance is found in the historical house price series of Paris under most model specifications.

Keywords: bubbles; generalized sup ADF test; exuberance; house prices; herengracht index; Amsterdam; Norway; Paris (search for similar items in EconPapers)
JEL-codes: G01 N20 N90 R30 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2016-08-15
New Economics Papers: this item is included in nep-his and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:wai:econwp:16/08

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