The Dynamics and Volatility of Commercial and Residential Property Prices: Theory and Evidence

Kamhon Kan (), Sunny Kai-Sun Kwong () and Charles Leung
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Sunny Kai-Sun Kwong: Department of Economics, Chinese University of Hong Kong, Shatin, Hong Kong

No 03-A004, IEAS Working Paper : academic research from Institute of Economics, Academia Sinica, Taipei, Taiwan

Abstract: This paper investigates the dynamics of property prices and their interaction with output growth in a general equilibrium model. Closed form solutions and testable hypotheses are derived from a mildly restricted version of the model. The testable hypotheses are broadly supported empirically. In particular, (1) the volatility of commercial property prices is higher than that of residential property prices, (2) each of the lagged, contemporary, and forward commercial property prices is positively correlated with residential property prices, (3) the contemporaneous covariance between the two property prices is larger than the lagged covariance, and (4) output growth is positively correlated with both property prices. These results are consistent with simulations results that are based on a more general specification of the model.

Keywords: property price dynamics; co-movements; commercial and residential property prices (search for similar items in EconPapers)
JEL-codes: E30 R31 R32 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2003-11
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Related works:
Journal Article: The Dynamics and Volatility of Commercial and Residential Property Prices: Theory and Evidence* (2004)
Working Paper: The Dynamics and Volatility of Commercial and Residential Property Prices: Theory and Evidence (2002)
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