TY - JOUR
T1 - Risk and structural instability in US house prices
AU - Karoglou, Michail
AU - Morley, Bruce
AU - Thomas, Dennis
PY - 2013/4
Y1 - 2013/4
N2 - This paper employs a Component GARCH in Mean model to show that house prices across a number of major US cities between 1987 and 2009 have displayed asset market properties in terms of both risk-return relationships and asymmetric adjustment to shocks. In addition, tests for structural breaks in the mean and variance indicate structural instability across the data range. Multiple breaks are identified across all cities, particularly for the early 1990s and during the post-2007 financial crisis as housing has become an increasingly risky asset. Estimating the models over the individual sub-samples suggests that over the last twenty years the financial sector has increasingly failed to account for the levels of risk associated with real estate markets. This result has possible implications for the way in which financial institutions should be regulated in the future.
AB - This paper employs a Component GARCH in Mean model to show that house prices across a number of major US cities between 1987 and 2009 have displayed asset market properties in terms of both risk-return relationships and asymmetric adjustment to shocks. In addition, tests for structural breaks in the mean and variance indicate structural instability across the data range. Multiple breaks are identified across all cities, particularly for the early 1990s and during the post-2007 financial crisis as housing has become an increasingly risky asset. Estimating the models over the individual sub-samples suggests that over the last twenty years the financial sector has increasingly failed to account for the levels of risk associated with real estate markets. This result has possible implications for the way in which financial institutions should be regulated in the future.
UR - http://www.scopus.com/inward/record.url?scp=84874965454&partnerID=8YFLogxK
UR - http://dx.doi.org/10.1007/s11146-011-9332-1
U2 - 10.1007/s11146-011-9332-1
DO - 10.1007/s11146-011-9332-1
M3 - Article
SN - 0895-5638
VL - 46
SP - 424
EP - 436
JO - Journal of Real Estate Finance and Economics
JF - Journal of Real Estate Finance and Economics
IS - 3
ER -