Behavioral heterogeneity in the Australian housing market

Wai-Mun Chia; Mengling Li; Huanhuan Zheng

doi:10.1080/00036846.2016.1208355

Behavioral heterogeneity in the Australian housing market

Wai-Mun Chia, Mengling Li, Huanhuan Zheng

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

6 Citations (Scopus)

Abstract

We propose a heterogeneous agent model (HAM) of four groups of investors with Markov chain regime-dependent beliefs for the housing market. Within the Markov switching framework, we take into account how heterogeneous investors shift their trading behaviour in response to changes in housing market conditions. The model is estimated and compared with the benchmark rational expectation models using the Australian housing market data from 1982Q1 to 2013Q2. We find evidence of within- and between-group heterogeneity in the Australian housing market. We show that HAM with Markov switching beliefs provides a better in-sample estimation efficiency and outperforms the conventional rational expectation models in terms of out-of-sample prediction. © 2016 Informa UK Limited, trading as Taylor & Francis Group.

Original language	English
Pages (from-to)	872-885
Journal	Applied Economics
Volume	49
Issue number	9
DOIs	https://doi.org/10.1080/00036846.2016.1208355
Publication status	Published - 19 Feb 2017
Externally published	Yes

Bibliographical note

Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

Funding

This work was supported by the Nanyang Technological University Tier 1 Research Project [RG180/14] and the Fundamental Research Funds for the Central Universities [grant number 20720161073].

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 11 Sustainable Cities and Communities

Research Keywords

behavioural heterogeneity
heterogeneous agent model
housing market
Regime switching

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10.1080/00036846.2016.1208355

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title = "Behavioral heterogeneity in the Australian housing market",

abstract = "We propose a heterogeneous agent model (HAM) of four groups of investors with Markov chain regime-dependent beliefs for the housing market. Within the Markov switching framework, we take into account how heterogeneous investors shift their trading behaviour in response to changes in housing market conditions. The model is estimated and compared with the benchmark rational expectation models using the Australian housing market data from 1982Q1 to 2013Q2. We find evidence of within- and between-group heterogeneity in the Australian housing market. We show that HAM with Markov switching beliefs provides a better in-sample estimation efficiency and outperforms the conventional rational expectation models in terms of out-of-sample prediction. {\textcopyright} 2016 Informa UK Limited, trading as Taylor & Francis Group.",

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AU - Chia, Wai-Mun

AU - Li, Mengling

AU - Zheng, Huanhuan

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N2 - We propose a heterogeneous agent model (HAM) of four groups of investors with Markov chain regime-dependent beliefs for the housing market. Within the Markov switching framework, we take into account how heterogeneous investors shift their trading behaviour in response to changes in housing market conditions. The model is estimated and compared with the benchmark rational expectation models using the Australian housing market data from 1982Q1 to 2013Q2. We find evidence of within- and between-group heterogeneity in the Australian housing market. We show that HAM with Markov switching beliefs provides a better in-sample estimation efficiency and outperforms the conventional rational expectation models in terms of out-of-sample prediction. © 2016 Informa UK Limited, trading as Taylor & Francis Group.

AB - We propose a heterogeneous agent model (HAM) of four groups of investors with Markov chain regime-dependent beliefs for the housing market. Within the Markov switching framework, we take into account how heterogeneous investors shift their trading behaviour in response to changes in housing market conditions. The model is estimated and compared with the benchmark rational expectation models using the Australian housing market data from 1982Q1 to 2013Q2. We find evidence of within- and between-group heterogeneity in the Australian housing market. We show that HAM with Markov switching beliefs provides a better in-sample estimation efficiency and outperforms the conventional rational expectation models in terms of out-of-sample prediction. © 2016 Informa UK Limited, trading as Taylor & Francis Group.

KW - behavioural heterogeneity

KW - heterogeneous agent model

KW - housing market

KW - Regime switching

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M3 - RGC 21 - Publication in refereed journal

SN - 0003-6846

VL - 49

SP - 872

EP - 885

JO - Applied Economics

JF - Applied Economics

IS - 9

ER -

Behavioral heterogeneity in the Australian housing market

Abstract

Bibliographical note

Funding

UN SDGs

Research Keywords

Policy Impact

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