Department of Economics and Business Economics

Housing market volatility in the OECD area: Evidence from VAR based return decompositions

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    Submitted manuscript, 389 KB, PDF document

Vector-autoregressive models are used to decompose housing returns in 18 OECD countries into cash ‡ow (rent) news and discount rate (return) news. Only for two countries - Germany and Ireland - do changing expectations of future rents play a dominating role in explaining housing return volatility. For the majority of countries news about future returns is the main driver, and both real interest rates and risk premia play an important role in accounting for housing market volatility. Bivariate cross-country correlations and principal components analyses indicate that part of the return movements have a common factor among the majority of countries. However, in a minority of countries (Germany, Japan, and the Netherlands) return movements have been basically unrelated to return movements
in other countries.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages26
Publication statusPublished - 28 Feb 2013
SeriesCREATES Research Papers
Number2013-4

    Research areas

  • Housing return volatility, variance decomposition, dynamic Gordon growth model, innovation and news components, VAR model, principal components, OECD countries

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