Arbeitspapier

What causes the positive price-turnover correlation in European housing markets?

This paper examines what determines the correlation between prices and turnover in European housing markets. Using a panel vector autoregressive model, we find that there is a particularly strong feedback mechanism between prices and turnover. Momentum effects are another important reason why prices and turnover are correlated. Common underlying factors, such as GDP and interest rates, also explain part of the price-turnover correlation. The results in this paper imply that, to understand price and turnover dynamics, it is important to model prices and turnover as two interdependent processes. Ignoring this interdependency results in a considerable bias in the coefficient estimates of both price and turnover models.

Language
Englisch

Bibliographic citation
Series: Tinbergen Institute Discussion Paper ; No. 16-008/VII

Classification
Wirtschaft
Institutions and the Macroeconomy
Housing Supply and Markets
Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
Subject
price-turnover relationship
feedback
momentum effects
credit constraints
nominal loss aversion

Event
Geistige Schöpfung
(who)
Dröes, Martijn I.
Francke, Marc K.
Event
Veröffentlichung
(who)
Tinbergen Institute
(where)
Amsterdam and Rotterdam
(when)
2016

Handle
Last update
10.03.2025, 11:41 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Dröes, Martijn I.
  • Francke, Marc K.
  • Tinbergen Institute

Time of origin

  • 2016

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