Conditional Variances in UK Regional House Prices

Abstract

The returns of house price indices for the 13 UK regions are modelled using time series processes, including conditional variances. The first conclusion is that the UK follows the USA, with some regions displaying time-varying variances and others with constant variances. Secondly, there is limited evidence of an asymmetric component in six of the seven regions displaying autoregressive conditional heteroskedasticity. Thirdly, the results suggest that there are three distinct housing markets in the UK, based on common structures within their mean and variance processes, and that South West England is the region driving the other time-varying variances. Variances conditionnelles dans les prix r�gionaux de l'immobilier au Royaume-Uni R�sum� Les r�sultats de l'indice des prix de l'immobilier pour les 13 r�gions du Royaume-Uni sont mod�lis�s ici au moyen de proc�d�s de s�ries chronologiques, y compris des variances conditionnelles. La premi�re conclusion est que le Royaume-Uni suit les �tats-Unis, certaines r�gions pr�sentant des variances temporelles, d'autres des variances constantes. Deuxi�mement, on rel�ve peu de traces d'un composant asym�trique dans six des sept r�gions pr�sentant une h�t�rosc�dasticit� conditionnelle autor�gressive. Troisi�mement, les r�sultats indiquent qu'il y aurait trois march�s de l'immobilier distincts au Royaume-Uni, sur la base de structures communes dans le cadre de leurs proc�d�s moyens et de variance, et que le sud-ouest de l'Angleterre est la r�gion qui dynamise les autres variances temporelles. Varianzas condicionales en los precios regionales de la vivienda en el Reino Unido Extracto Las cifras de los �ndices de precios de la vivienda en 13 regiones del Reino Unido se modelan utilizando procesos de series temporales, incluyendo varianzas condicionales. La primera conclusi�n es que el Reino Unido sigue a los EE UU, con varias regiones que muestran varianzas fluctuantes con el tiempo y otras con varianzas constantes. En segundo lugar, existe evidencia limitada de un componente asim�trico en seis de las siete regiones que muestran una heteroesquedacidad condicional autorregresiva. En tercer lugar, los resultados sugieren que existen tres mercados distintivos de la vivienda en el Reino Unido, basados en estructuras comunes dentro de sus procesos de media y varianza, y que el sudoeste de Inglaterra es la regi�n que dirige las otras varianzas fluctuantes con el tiempo.UK regions, house prices, GARCH, C22, R12,

An empirical analysis of the Scottish housing market by property type

“…The lag order of the estimated ARMA model for each property type is reported in Table . We have found that different ARMA model lag orders are present across the different property types, a finding which is in accordance with Miller and Peng () and Willcocks (), who highlight that housing markets are heterogeneous.…”

“…where R it is the logarithmic house price change in month t for house property type i, and P it is the average monthly house price in month t for house property type i. It should be noted, however, that following Willcocks (2010), the returns are not smoothed or adjusted for inflation, as this could hide the impact of volatility changes over adjacent time periods. 1 In addition, in order to study the determinants of the Scottish housing market, we also include the Scottish unemployment rate, UK interest rate and UK CPI index in our dataset.…”

Double layer in an expanding plasma: Simultaneous upstream and downstream measurements

“…The significance of this analysis has implications for investment strategy in housing, especially for investors in multi-family real estate investment trusts (REITs) and single-family housing investment funds, as highlighted in . This paper also combines and extends two separate strands of research in housing: one stream on conditional analysis (e.g., Dolde & Tirtiroglu, 1997;Karoglou et al, 2013;Lin & Fuerst, 2014;Miles, 2008Miles, , 2011Morley & Thomas, 2011Willcocks, 2010;Zhou, 2016) and the other stream on unconditional analysis (e.g., . Fundamentally, I illustrate that the empirical analysis of the two schools of thought can be theoretically equivalent to a single-factor model.…”

“…Yet, despite its significance, little is known about how housing returns vary with price risk. While standard finance theory generally predicts a positive relationship between the market risk premium and conditional risk for risk-averse agents, a large body of empirical studies shows a negative relationship in housing markets (e.g., Dolde & Tirtiroglu, 1997;Karoglou, Morley, & Thomas, 2013;Lin & Fuerst, 2014;Miles, 2008Miles, , 2011Morley & Thomas, 2011Willcocks, 2010;Zhou, 2016).…”

“…Through the families of Generalised Autoregressive Conditionally Heteroskedastic in the Mean (GARCH-M) models, the housing literature (e.g., Dolde & Tirtiroglu, 1997;Karoglou et al, 2013;Lin & Fuerst, 2014;Miles, 2008Miles, , 2011Morley & Thomas, 2011Willcocks, 2010;Zhou, 2016) shows a significantly positive risk-return trade-off in some regional markets but a significantly negative trade-off in others. Underlying this contradiction is the presumption that GARCH-M analysis is a reasonable approach for examining the theoretical risk-return relationship in regional markets.…”