Abstract
PurposeThe purpose of this paper is to show an indication that the asymmetric volatility between house price movement may account for the defensiveness of the housing market.Design/methodology/approachFirst the UK nation‐wide house price data from the last quarter (Q4) of 1955 to the last quarter of 2005 are used and then the most suitable mean and variance equations to estimate the conditional heteroscedasticity volatilities of the returns of house prices are selected. Second, a variable that examines the leverage effect of volatility is incorporated into the model. The GJR‐GARCH model is used.FindingsThe results of the empirical test show that while the lagged innovations are negatively correlated with housing return, that is when there is bad news, the current volatility of housing return might decline.Research limitations/implicationsThe results indicate that the volatilities between house prices moving up and moving down are asymmetric.Practical implicationsThe results show that there is a defensive effect in the UK housing market during the data periods used.Originality/valueAlthough several articles have documented that there is heteroscedasticity and autocorrelation in the volatilities of real estate prices, few of those papers have noted one of the most important advantages of the housing market, its defensiveness, from the viewpoint of volatile behavior.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.