Testing Alternative Theories of the Property Price-Trading Volume Correlation

22 Pages Posted: 9 Jun 2003

See all articles by Charles Ka Yui Leung

Charles Ka Yui Leung

The Chinese University of Hong Kong (CUHK) - Department of Economics

Garion Chi Keung Lau

Independent

Chun Fai Youngman Leong

The Chinese University of Hong Kong

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Abstract

This paper examines the correlation between the real housing price and trading volume. Contrary to the predictions of standard rational expectation models, a robust positive correlation between the two variables is identified. While no clear lead-lag relationship is found in the raw data (which is more consistent with the down-payment effect model), the medium-run component of the trading volume tends to lead (and Granger cause) the corresponding component of the property price (which is more consistent with the search theoretic model). An explanation for this difference in behavior is suggested and several future research directions are provided.

Keywords: trading volume, housing price, down-payment, search, lead-lag relation

JEL Classification: E30, G12, R00, R31

Suggested Citation

Leung, Ka Yui Charles and Lau, Garion Chi Keung and Leong, Chun Fai Youngman, Testing Alternative Theories of the Property Price-Trading Volume Correlation. Available at SSRN: https://ssrn.com/abstract=409080 or http://dx.doi.org/10.2139/ssrn.409080

Ka Yui Charles Leung (Contact Author)

The Chinese University of Hong Kong (CUHK) - Department of Economics ( email )

Shatin, N.T.
Hong Kong
+852-2609-7158 (Phone)
+852-2603-5805 (Fax)

HOME PAGE: http://www.cuhk.edu.hk/eco/staff/kyleung

Garion Chi Keung Lau

Independent

No Address Available

Chun Fai Youngman Leong

The Chinese University of Hong Kong ( email )

Hong Kong
Hong Kong

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