Transaction Volume and Price Dispersion in the Presale and Spot Real Estate Market - Implications for Construction of Repeat Sales Price Indices

17 Pages Posted: 12 Sep 2008

See all articles by Edward Chung Yim Yiu

Edward Chung Yim Yiu

University of Auckland Business School

K.W. Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics

Siu Kei Wong

University of Hong Kong

Date Written: September 12, 2008

Abstract

Noise trading has been intensively studied in finance, but rarely in real estate. Theories of price dispersion have also been well established in retailing research, but rarely in real estate. This paper is probably the first attempt to study the effect of noise trading on the price dispersions in the presale and spot housing market in Hong Kong. Quality-controlled price dispersion data series are estimated using a sample of data in the housing presale and spot market in Hong Kong. The results show transaction volume has negative and significant effect on price dispersion in spot market. The volume effect is however negative and significant in the presale market. The results support our theoretical prediction that there are more noise traders in the presale market due to lower transaction costs. The volume effect provides support for a volume weighted least squares repeat sales index.

Keywords: Noise trader, Price dispersion, Trading volume, Repeat-sales Model

JEL Classification: D83, G13

Suggested Citation

Yiu, Edward Chung Yim and Chau, Kwong Wing and Wong, Siu Kei, Transaction Volume and Price Dispersion in the Presale and Spot Real Estate Market - Implications for Construction of Repeat Sales Price Indices (September 12, 2008). Available at SSRN: https://ssrn.com/abstract=1267102 or http://dx.doi.org/10.2139/ssrn.1267102

Edward Chung Yim Yiu (Contact Author)

University of Auckland Business School ( email )

Sir Owen G Glenn Building
12 Grafton Road
Auckland, 1024
New Zealand
+64 923 3913 (Phone)

HOME PAGE: http://https://unidirectory.auckland.ac.nz/people/profile/edward-yiu

Kwong Wing Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics ( email )

Ronald Coase Centre for Property Rights Research
Pokfulam Road
Hong Kong
Hong Kong
(852)28592128 (Phone)
(852)25599457 (Fax)

Siu Kei Wong

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, HK
China

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