Risk Transfer among Housing Markets in Major Cities in China

I-Chun Tsai and Shu-Hen Chiang
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I-Chun Tsai: Department of Finance, National University of Kaohsiung, No. 700, Kaohsiung University Rd., Nanzih District, Kaohsiung 811, Taiwan
Shu-Hen Chiang: Department of Finance, Chung Yuan Christian University, Taoyuan City 320, Taiwan

Sustainability, 2018, vol. 10, issue 7, 1-20

Abstract: This study explored risk transfer among the housing markets of five major cities in China, comprising three first-tier cities (i.e., Beijing, Shanghai, and Shenzhen) and two second-tier cities (i.e., Tianjin and Chongqing). House price index data from January 2001 to June 2017 and a vector autoregressive–multivariate generalized autoregressive conditional heteroscedasticity model were employed to estimate correlations among these cities related to house price returns and volatility. In addition, volatility impulse-response functions were estimated to determine interactions among housing market risk in different cities. The results revealed that first-tier cities were more likely to transfer risk to second-tier cities, and that Beijing’s housing market exerted the greatest influence on risk in other cities’ housing markets. To consider the influence of the 2008 global financial crisis, data collected before and after the crisis were divided into two groups for subsequent investigation. The results revealed that these cities became more closely interrelated after the financial crisis, thereby escalating the risk of impulse influences. Finally, this study evaluated the influences of macroeconomic impulses on the housing markets of the three first-tier cities, indicating that real estate in these three cities can protect investors against inflation. The evidence presented in this paper can serve as a reference for the Chinese government regarding risk control.

Keywords: China’s housing market; housing market risk; risk transfer; volatility impulse-response function; financial crisis (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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