Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2016-02-04
Number: 16-008/IV
Author-Name: Martijn I. Dröes
Author-Workplace-Name: University of Amsterdam, and Amsterdam School of Real Estate, the Netherlands
Author-Name: Marc K. Francke
Author-Workplace-Name: Amsterdam School of Real Estate, the Netherlands
Title: What causes the Positive Price-Turnover Correlation in European Housing Markets?
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. Ignoring this interdependency results in a considerable bias in the coefficient estimates of both price and turnover models.
Classification-JEL: E02, R31, O18
Keywords: price-turnover relationship; feedback; momentum effects; credit constraints; nominal loss aversion
File-Url: https://papers.tinbergen.nl/16008.pdf
File-Format: application/pdf
File-Size: 472502 bytes
Handle: RePEc:tin:wpaper:20160008