Cointegration of Matched Home Purchases and Rental Price Indexes: Evidence from Singapore

Badi Baltagi and Jing Li ()
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Jing Li: School of Economics, Singapore Management University, 90 Stamford Road, Singapore, 178903

No 185, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: This paper exploits the homogeneity feature of the Singapore private residential condominium market and constructs matched home purchase price and rental price series using the repeated sales method. These matched series allow us to conduct time series analysis to examine the long-term present value relationship in the housing market. Three key findings are obtained. First, we fail to establish a cointegrating relationship between the home purchase price and rental price based on nationally estimated indexes. Second, area specific indexes demonstrate strong cross-correlations, invalidating the use of first generation panel unit root tests that ignore these cross-correlations. Third, Pesaran’s CIPS test indicates that the unit root hypothesis is rejected for the first difference of both indexes. We also do not reject the hypothesis that home purchases and rental price indexes are cointegrated with a cointegrating vector (1,-1).

Keywords: Cointegration; Housing Market; Purchase and Rental Price; Market Efficiency (search for similar items in EconPapers)
JEL-codes: C1 R00 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015-10
New Economics Papers: this item is included in nep-sea
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Citations: View citations in EconPapers (6)

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https://surface.syr.edu/cpr/222/ (application/pdf)

Related works:
Journal Article: Cointegration of matched home purchases and rental price indexes — Evidence from Singapore (2015)
Working Paper: Cointegration of Matched Home Purchases and Rental Price Indexes - Evidence from Sinpagore (2015)
Working Paper: Cointegration of Matched Home Purchases and Rental Price Indexes - Evidence from Singapore (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:max:cprwps:185

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