{"title":"Rationality test in the housing market: Project-level evidence from China","authors":"Yifan Chen, Jianhua Gang, Zongxin Qian, Jinfan Zhang","doi":"10.1111/jors.12632","DOIUrl":null,"url":null,"abstract":"<p>We test whether investors rationally react to rent news when pricing houses. Previous literature on house pricing uses aggregated housing price and rent data to estimate the rent news. We analytically demonstrate that using aggregated data biases the rationality test because it forces researchers to estimate the rent news using the cross-project average dynamic relationship among the housing return, rent growth, and macroeconomic dynamics and, hence, misses the heterogeneity in the dynamic relationship. Our empirical tests using proprietary project-level housing data from China's megacities find that the bias from missing the heterogeneity is economically substantial.</p>","PeriodicalId":48059,"journal":{"name":"Journal of Regional Science","volume":null,"pages":null},"PeriodicalIF":3.2000,"publicationDate":"2022-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Regional Science","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/jors.12632","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
We test whether investors rationally react to rent news when pricing houses. Previous literature on house pricing uses aggregated housing price and rent data to estimate the rent news. We analytically demonstrate that using aggregated data biases the rationality test because it forces researchers to estimate the rent news using the cross-project average dynamic relationship among the housing return, rent growth, and macroeconomic dynamics and, hence, misses the heterogeneity in the dynamic relationship. Our empirical tests using proprietary project-level housing data from China's megacities find that the bias from missing the heterogeneity is economically substantial.
期刊介绍:
The Journal of Regional Science (JRS) publishes original analytical research at the intersection of economics and quantitative geography. Since 1958, the JRS has published leading contributions to urban and regional thought including rigorous methodological contributions and seminal theoretical pieces. The JRS is one of the most highly cited journals in urban and regional research, planning, geography, and the environment. The JRS publishes work that advances our understanding of the geographic dimensions of urban and regional economies, human settlements, and policies related to cities and regions.