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Regime switches and permanent changes in impacts of housing risk factors on MSA‐level housing returns
Author(s) -
Huang MeiChi
Publication year - 2021
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1791
Subject(s) - metropolitan area , market liquidity , economics , volatility (finance) , boom , bust , monetary economics , liquidity risk , financial economics , geography , engineering , environmental engineering , archaeology
This study assesses impacts of housing risk factors on metropolitan housing excess returns in the augmented housing pricing model. Credit and liquidity factors represent demand and supply sides, respectively, of housing markets. All metropolitan statistical areas have significant regime switches, and booms and busts are turbulent and influenced by the two factors. The explanatory powers of the liquidity factor shrivel for the boom‐bust and regime‐switching volatility specifications, and excess housing returns are less sensitive to nationwide housing dynamics after 2008. This study lends support to time‐varying exposures of housing excess returns to risk factors in terms of temporary switches and permanent changes.