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Identifying bubbles in the Swedish housing market

Othmani, May LU (2019) NEKN01 20191
Department of Economics
Abstract
After careful review of the ongoing research on bubble detection, this thesis deals with the potentiality of a bubble in the Swedish housing market in the past decade. The methodological approach taken in this study is a mixed procedure based on two models. Based on the augmented Dickey-Fuller test along with a forward recursive regression to identify unit-root behavior, the Phillips, Wu, and Yu's (2011) model is the first one analyzed. To complete a thorough analysis, a second model is introduced: a cointegrating test is conducted to recognize relationships between house prices and fundamental variables such as the long- term interest and a confidence indicator as well as the income distribution nationwide. The investigation has... (More)
After careful review of the ongoing research on bubble detection, this thesis deals with the potentiality of a bubble in the Swedish housing market in the past decade. The methodological approach taken in this study is a mixed procedure based on two models. Based on the augmented Dickey-Fuller test along with a forward recursive regression to identify unit-root behavior, the Phillips, Wu, and Yu's (2011) model is the first one analyzed. To complete a thorough analysis, a second model is introduced: a cointegrating test is conducted to recognize relationships between house prices and fundamental variables such as the long- term interest and a confidence indicator as well as the income distribution nationwide. The investigation has identified the emergence of a bubble approximately around January 2013 as well as a cointegrating relationship between house prices and income distribution. However, when the test is renewed using the confidence interval and the long-term interest rate along with the housing prices, no relationship is identified. However, with a small sample size as well as distinct markets from the ones previously analyzed by researchers, caution must be applied, as the findings might precipitate my conclusion for an existing bubble. (Less)
Please use this url to cite or link to this publication:
author
Othmani, May LU
supervisor
organization
course
NEKN01 20191
year
type
H1 - Master's Degree (One Year)
subject
keywords
Bubble detection, Sweden, Housing market
language
English
id
8983026
date added to LUP
2019-08-08 10:31:40
date last changed
2019-08-08 10:31:40
@misc{8983026,
  abstract     = {{After careful review of the ongoing research on bubble detection, this thesis deals with the potentiality of a bubble in the Swedish housing market in the past decade. The methodological approach taken in this study is a mixed procedure based on two models. Based on the augmented Dickey-Fuller test along with a forward recursive regression to identify unit-root behavior, the Phillips, Wu, and Yu's (2011) model is the first one analyzed. To complete a thorough analysis, a second model is introduced: a cointegrating test is conducted to recognize relationships between house prices and fundamental variables such as the long- term interest and a confidence indicator as well as the income distribution nationwide. The investigation has identified the emergence of a bubble approximately around January 2013 as well as a cointegrating relationship between house prices and income distribution. However, when the test is renewed using the confidence interval and the long-term interest rate along with the housing prices, no relationship is identified. However, with a small sample size as well as distinct markets from the ones previously analyzed by researchers, caution must be applied, as the findings might precipitate my conclusion for an existing bubble.}},
  author       = {{Othmani, May}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Identifying bubbles in the Swedish housing market}},
  year         = {{2019}},
}