Risky or hedging centre? A novel approach for bidirectional ripple effects of urban house prices

Abstract

ABSTRACT This study introduces a novel bidirectional ripple effect model to examine the static and dynamic ripple effects in the housing markets of urban cities in China. By investigating the influence of idiosyncratic volatility on market co-movements, this study effectively identifies risky and hedging centres, along with the durations of the ripple effects. The results show that Beijing, Shanghai, Guangzhou, Hangzhou, Nanjing, Bengbu, Luoyang, and Wuhan are more likely to be identified as risky centres, whereas Ningbo and Wenzhou stand out as hedging centres. The results also show that most cities exhibit greater density and longer durations of risky ripple effects than hedging ripple effects, implying a switch between risky and hedging centres. Overall, the proposed method provides a comprehensive understanding of the ripple effects in housing markets and benefits policymakers and investors.