Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267887 
Authors: 
Year of Publication: 
2022
Citation: 
[Journal:] KDI Journal of Economic Policy [ISSN:] 2586-4130 [Volume:] 44 [Issue:] 4 [Publisher:] Korea Development Institute (KDI) [Place:] Sejong [Year:] 2022 [Pages:] 79-108
Publisher: 
Korea Development Institute (KDI), Sejong
Abstract: 
This study examines the impact of sentiment shock, which is defined as a stochastic innovation to the Housing Market Confidence Index (HMCI) that is orthogonal to past housing price changes, on aggregate housing price changes and housing price volatility. This paper documents empirical evidence that sentiment shock has a statistically significant relationship with Korea's aggregate housing price changes. Specifically, the key findings show that an increase in sentiment shock predicts a rise in the aggregate housing price and a drop in its volatility at the national level. For the Seoul Metropolitan Region (SMR), this study also suggests that sentiment shock is positively associated with one-month-ahead aggregate housing price changes, whereas an increase in sentiment volatility tends to increase housing price volatility as well. In addition, the out-of-sample forecasting exercises conducted here reveal that the prediction model endowed with sentiment shock and sentiment volatility outperforms other competing prediction models.
Subjects: 
Sentiment
Housing Price
Out-of-sample Forecasts
Seemingly Unrelated Regression
JEL: 
G12
R30
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-sa Logo
Document Type: 
Article

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