What Causes the Positive Price-Turnover Correlation in European Housing Markets?

Open Access
Authors
Publication date 11-2018
Journal Journal of Real Estate Finance and Economics
Volume | Issue number 57 | 4
Pages (from-to) 618-646
Number of pages 29
Organisations
  • Faculty of Economics and Business (FEB)
  • Faculty of Economics and Business (FEB) - Amsterdam Business School Research Institute (ABS-RI)
Abstract
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. There is a considerable bias in the coefficient estimates of standard house price models if this dependency is not explicitly taken into account.
Document type Article
Language English
Published at https://doi.org/10.1007/s11146-017-9602-7
Downloads
Permalink to this page
Back