EXPECTATIONS OF HOUSE‐PRICE CHANGES

Richard F. Muth

Papers in Regional Science, 1986, vol. 59, issue 1, 45-55

Abstract: ABSTRACT Expectations of the future are of great importance for many economic theories. While expected values of economic variables are typically unobservable, expectations of house‐price changes can be inferred from data on the space‐rental value of dwellings and its other determinants. This paper first discusses the behavior of expected changes in house prices so estimated. The formation of these expectations is then examined. The hypothesis of adaptive expectations is found to explain the data quite well. The rational expectations hypothesis, however, does very poorly.

Date: 1986
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https://doi.org/10.1111/j.1435-5597.1986.tb00981.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:presci:v:59:y:1986:i:1:p:45-55

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