Irreversibility, Uncertainty and Housing Investment

Posted: 19 Oct 2008

See all articles by William Miles

William Miles

Wichita State University - Department of Economics

Date Written: October, 17 2008

Abstract

Housing represents a form of "irreversible" investment. Theoretically, increased uncertainty should lower housing investment. Empirically, finding a proxy for uncertainty has proven problematic. Some recent papers have investigated the effect of uncertainty on real estate investment, with varying proxies for uncertainty and mixed results. This paper employs a technique used in modern marcroeconomic studies, the GARCH-M model, which has been shown to correspond as closely as any known measure to theoretical concepts of uncertainty. Results indicate that uncertainty indeed has a negative impact on housing starts.

Keywords: housing, investment, irreversibility

Suggested Citation

Miles, William, Irreversibility, Uncertainty and Housing Investment (October, 17 2008). Journal of Real Estate Finance and Economics, Vol. 38, No. 2, 2009, Available at SSRN: https://ssrn.com/abstract=1286160

William Miles (Contact Author)

Wichita State University - Department of Economics ( email )

Wichita, KS 67260-0078
United States

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