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House Market in Chinese Cities: Dynamic Modeling, In-Sample Fitting and Out-of-Sample Forecasting

44 Pages Posted: 24 Aug 2010  

Charles K. Leung

City University of Hong Kong

Kenneth K. Chow

Hong Kong Institute for Monetary Research

Matthew S. Yiu

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR)

Dickson C. Tam

affiliation not provided to SSRN

Date Written: August 22, 2010

Abstract

This paper attempts to contribute in several ways. Theoretically, it proposes simple models of house price dynamics and construction dynamics, all based on forward-looking agents’ maximization problems, which may carry independent interests. Simplified version of the model implications are estimated with the data from four major cities in China. Both price and construction dynamics exhibit strong persistence in al cities. Significant heterogeneity across cities is found. Our models out-perform widely used alternatives in in-sample-fitting for all cities, although similar success only limited to highly developed cities in out-of-sample forecasting. Policy implications and future research directions are also discussed.

Keywords: pre-sale, production constraint, collateral constraint, cross-city heterogeneity, fundamental versus policy

JEL Classification: C33, E30, R00

Suggested Citation

Leung, Charles K. and Chow, Kenneth K. and Yiu, Matthew S. and Tam, Dickson C., House Market in Chinese Cities: Dynamic Modeling, In-Sample Fitting and Out-of-Sample Forecasting (August 22, 2010). Available at SSRN: https://ssrn.com/abstract=1663460 or http://dx.doi.org/10.2139/ssrn.1663460

Charles Ka Yui Leung (Contact Author)

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Kenneth K. Chow

Hong Kong Institute for Monetary Research ( email )

55/F, Two International Finance Centre
8 Finance Street, Central
Hong Kong
Hong Kong
2878 1975 (Phone)
2878 7006 (Fax)

Matthew S. Yiu

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR) ( email )

55/F Two IFC
8 Finance Street, Central
Hong Kong, HK
China
+852 2878 1974 (Phone)
+852 2878 7006 (Fax)

Dickson C. Tam

affiliation not provided to SSRN

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