Modeling Real Estate Price Volatility in Jordan: An Analysis Using the EGARCH Model

Abstract

This study investigates the volatility of the Real Estate Price Index (REPI) in Jordan from 2005 to 2021, with a focus on how macroeconomic variables, particularly GDP growth and interest rates, influence real estate price fluctuations. Using quarterly data, the study employs the Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model, which is well-suited for capturing volatility clustering and asymmetric responses to shocks in financial time series. The results reveal a significant positive relationship between GDP growth and real estate returns, while higher interest rates tend to reduce returns. The analysis also uncovers the presence of volatility clustering, where periods of high volatility are followed by more volatility, and asymmetric effects, with negative shocks increasing volatility more than positive shocks of the same magnitude. The findings provide valuable insights for policymakers and investors in understanding the dynamics of the Jordanian real estate market, highlighting the importance of macroeconomic factors in influencing price stability. This research contributes to the growing body of literature on real estate price volatility, offering a robust model for analyzing market risks in emerging economies 1 .

Keywords: Real Estate Price Index (REPI), Price Volatility, EGARCH Model, Macroeconomic Variables, GDP Growth. JEL: E32, G12, R31, R33