The dual role of sentiment on housing prices in China

Xinyu Wang, Zhuangzhi Fang and Zhenxin Wang

International Review of Economics & Finance, 2025, vol. 97, issue C

Abstract: This research investigated the role of sentiment on housing prices in China from 2013 to 2022 within a time-varying framework, highlighting the underexplored liquidity channel. We constructed a housing sentiment index by analyzing over 2.44 million social media posts using the Bidirectional Encoder Representations from Transformers (BERT) technique, which is recognized for its advanced capability in processing natural language. With a Time-Varying Coefficient Vector Autoregression (TVC-VAR) model, we estimated the time-varying impulse response of housing prices to sentiment and liquidity shocks, as well as the response of liquidity to sentiment shocks. Our findings revealed that positive public sentiment not only directly pushes housing prices upwards but also indirectly inflates them through an enhanced liquidity, a byproduct of optimism. Notably, the dual role of sentiment becomes more pronounced during the periods with high uncertainty, such as COVID-19 pandemic period. Moreover, our conclusions survived a battery of robustness checks. The results underscore the importance of integrating psychological factors and market dynamics to understand the complexities of real estate markets, particularly in turbulent times.

Keywords: Housing sentiment; Liquidity; BERT; TVC-VAR (search for similar items in EconPapers)
JEL-codes: C32 G41 R21 R31 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S105905602400724X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:97:y:2025:i:c:s105905602400724x

DOI: 10.1016/j.iref.2024.103732

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().