Housing Price, Mortgage Lending and Financial Crisis: A UK Perspective
||Housing Price, Mortgage Lending and Financial Crisis: A UK Perspective
||16th Annual European Real Estate Society Conference in Stockholm, Sweden
||The standard literature usually models the price dynamics as a martingale process with the assumption that asset markets are continuously efficient. A casual glance at the experiences of the world would suggest otherwise. In this study, we differentiate ourselves by explicitly model the nonlinear dynamic interactions between two market forces: a speculative trend-following bubble-creation force and an error-correction equilibrium-returning force. We will try to explain how such interaction, facilitated with credit supplied by speculative financial institutions, can lead to market crashes. The model will be tested against relevant UK data.
||Housing bubble, mortgage, market crash, nonlinearity
||file.ppt (1,287,168 bytes)
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||Cycles and Crises
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