Volatility in the Housing Market: Evidence on Risk and Return in theLondon Sub-market

Steve Cook; Duncan Watson; Steve Cook; Duncan Watson

doi:10.3934/QFE.2017.3.272

Quantitative Finance and Economics

2017, Volume 1, Issue 3: 272-287. doi: 10.3934/QFE.2017.3.272

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Research article Special Issues

Volatility in the Housing Market: Evidence on Risk and Return in theLondon Sub-market

Steve Cook ^{1
,
,},
Duncan Watson ²

1.
Department of Finance, Swansea University, Bay Campus, Swansea SA1 8EN, UK
2.
School of Economics, University of East Anglia, Norwich NR4 7TJ, UK

Received: 27 June 2017 Accepted: 18 September 2017 Published: 12 October 2017

The impact of volatility in housing market analysis is reconsidered via examinaton of the risk-return relationship in the London housing market is examined. In addition to providing the first empirical results for the relationship between risk (as measured by volatility) and returns for this submarket, the analysis offers a more general message to empiricists via a detailed and explicit evaluation of the impact of empirical design decisions upon inferences. In particular, the negative risk-return relationship discussed frequently in the housing market literature is examined and shown to depend upon typically overlooked decisions concerning components of the empirical framework from which statistical inferences are drawn.
- regional housing markets,
- risk analysis,
- volatility,
- rolling samples
Citation: Steve Cook, Duncan Watson. Volatility in the Housing Market: Evidence on Risk and Return in theLondon Sub-market[J]. Quantitative Finance and Economics, 2017, 1(3): 272-287. doi: 10.3934/QFE.2017.3.272

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Abstract

The impact of volatility in housing market analysis is reconsidered via examinaton of the risk-return relationship in the London housing market is examined. In addition to providing the first empirical results for the relationship between risk (as measured by volatility) and returns for this submarket, the analysis offers a more general message to empiricists via a detailed and explicit evaluation of the impact of empirical design decisions upon inferences. In particular, the negative risk-return relationship discussed frequently in the housing market literature is examined and shown to depend upon typically overlooked decisions concerning components of the empirical framework from which statistical inferences are drawn.

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