The Dynamics in Swedish House Prices - An Empirical Time Series Analysis

Abstract

Appreciation of prices in the housing market is analysed in this paper with different statistical tests. Using Ljung-Box test statistics for monthly data for a sample that starts in the beginning of 1981 and ends in the mid 1993 the EMH, efficient market hypothesis is rejected for nominal and real appreciation of house prices and excess return. When non-parametric and semi-parametric tests as modified R/S analysis and GPH analysis are used we get different results. Both robust methods show no presence of long run memory for the full sample, i.e. the EMH is not rejected. For shorter sample of approximately a length of 4 years, the R/S analysis indicates a mean diverting behaviour for the three time series for the end of the 1980s and beginning of 1990, i.e. the EMH is rejected. Changes in government policy towards the housing market are probably most important in this respect. The contribution of the paper is to use robust modern time series analysis to determine the lag length for the adjustment period in the housing market.