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J. Risk Financial Manag. 2018, 11(3), 54; https://doi.org/10.3390/jrfm11030054

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

Cass Business School, City University of London, London EC1Y 8TZ, UK
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Received: 24 July 2018 / Revised: 9 September 2018 / Accepted: 10 September 2018 / Published: 13 September 2018
(This article belongs to the Special Issue Housing Market Bubbles, Credit and Crashes)
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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 is reversion 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. View Full-Text
Keywords: U.K. regional house price; housing bubbles; pooled mean group estimation; mean group estimation U.K. regional house price; housing bubbles; pooled mean group estimation; mean group estimation
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Wu, Y.; Lux, N. U.K. House Prices: Bubbles or Market Efficiency? Evidence from Regional Analysis. J. Risk Financial Manag. 2018, 11, 54.

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