Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/130489 
Year of Publication: 
2016
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 16-008/VII
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
This paper examines what determines the correlation between prices and turnover in European housing markets. Using a panel vector autoregressive model, we find that there is a particularly strong feedback mechanism between prices and turnover. Momentum effects are another important reason why prices and turnover are correlated. Common underlying factors, such as GDP and interest rates, also explain part of the price-turnover correlation. The results in this paper imply that, to understand price and turnover dynamics, it is important to model prices and turnover as two interdependent processes. Ignoring this interdependency results in a considerable bias in the coefficient estimates of both price and turnover models.
Subjects: 
price-turnover relationship
feedback
momentum effects
credit constraints
nominal loss aversion
JEL: 
E02
R31
O18
Document Type: 
Working Paper

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