U.K. House Prices: Bubbles or Market Efficiency? Evidence from Regional Analysis
Yi Wu () and
Nicole Lux ()
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Yi Wu: Cass Business School, City University of London, London EC1Y 8TZ, UK
Nicole Lux: Cass Business School, City University of London, London EC1Y 8TZ, UK
Journal of Risk and Financial Management, 2018, vol. 11, issue 3, 1-16
This paper studies U.K. regional house prices across nine regions from January 2005 to December 2017 to identify regional versus national effects on house prices and potential house price bubbles. It uses a version of the Gordon dividend discount model, modelling house prices as the present value of imputed rents as a measure of fundamentals. It differentiates between long-term and short-term effect using pooled mean group (PMG) and mean group estimation (MG) to determine variations in regional house prices during different periods relating to the most recent financial crisis. The results confirm that the crisis had differentiating effects in the short term, but there is reversion back to long-run fundamentals. Regional trend analysis shows that the house price growth in the regions has been affected differently in the short run and each region has varying long-run fundamentals. Residential property values in London have shown strongest short-run momentum.
Keywords: U.K. regional house price; housing bubbles; pooled mean group estimation; mean group estimation (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:11:y:2018:i:3:p:54-:d:169559
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