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Testing for Bubbles in the Colombian Housing Market: A New Approach

José E. Gómez-González (), Jair Ojeda-Joya (), Catalina Rey-Guerra () and Natalia Sicard ()
Authors registered in the RePEc Author Service: Jose Eduardo Gomez-Gonzalez ()

Revista Desarrollo y Sociedad, 2015

Abstract: In the context of financial crises influenced by the development and burst of housing price bubbles, the detection of exuberant behaviors in the financial market and the implementation of early warning diagnosis tests are of vital importance. This paper applies the bubble-detection methodology developed by Phillips, Shi and Yu (2012) to the most important Colombian residential property market. The empirical results suggest that this housing market experienced a price bubble that began in the second half of 2012. This result holds true under alternative robustness checks, namely alternative price deflators, regression windows and price segments. The only exception is in the case of the low-price segment of the housing market where prices have not increased recently. Bubble episodes, under this approach, consist of periods of explosive behavior of the nominal asset price which are not explained by the evolution of its market returns.

Keywords: Housing-price bubbles; unit-root tests; asset pricing; Colombia (search for similar items in EconPapers)
JEL-codes: C22 G12 R31 (search for similar items in EconPapers)
Date: 2015
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