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U.K. House Prices: Bubbles or Market Efficiency? Evidence from Regional Analysis

Wu, Y. and Lux, N. (2018). U.K. House Prices: Bubbles or Market Efficiency? Evidence from Regional Analysis. Journal of Risk and Financial Management, 11(3), doi: 10.3390/jrfm11030054

Abstract

This paper studies U.K. regional house prices across nine regions from January 2005 to December 2017 to identify regional versus national effects on house prices and potential house price bubbles. It uses a version of the Gordon dividend discount model, modelling house prices as the present value of imputed rents as a measure of fundamentals. It differentiates between long-term and short-term effect using pooled mean group (PMG) and mean group estimation (MG) to determine variations in regional house prices during different periods relating to the most recent financial crisis. The results confirm that the crisis had differentiating effects in the short term, but there isreversion back to long-run fundamentals. Regional trend analysis shows that the house price growth in the regions has been affected differently in the short run and each region has varying long-run fundamentals. Residential property values in London have shown strongest short-run momentum.

Publication Type: Article
Additional Information: © 2018 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0
Subjects: D History General and Old World > DA Great Britain
H Social Sciences > HG Finance
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/20505
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