Testing for Rational Speculative Bubbles in the Brazilian Residential Real-Estate Market

Marcelo M. de Oliveira and Alexandre C. L. Almeida

A chapter in Risk Management Post Financial Crisis: A Period of Monetary Easing, 2014, vol. 96, pp 401-416 from Emerald Group Publishing Limited

Abstract: Speculative bubbles have been occurring periodically in local or global real-estate markets and are considered a potential cause of economic crises. In this context, the detection of explosive behaviors in the financial market and the implementation of early warning diagnosis tests are of critical importance. The recent increase in Brazilian housing prices has risen concerns that the Brazilian economy may have a speculative housing bubble. In the present chapter, we employ a recently proposed recursive unit root test in order to identify possible speculative bubbles in data from the Brazilian residential real-estate market. The empirical results show evidence for speculative price bubbles both in Rio de Janeiro and São Paulo, the two main Brazilian cities.

Keywords: Global financial crisis; value at risk; GARCH models; extreme value theory; back-testing; C15; C22; G01; R31 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eme:csefzz:s1569-375920140000096017

DOI: 10.1108/S1569-375920140000096017

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