RT Monograph
SR 00
A1 Fève, Patrick
A1 Moura, Alban
T1 Frictionless house-price momentum
YR 2023
FD 2023-11
VO 23-1488
SP 34
K1 house prices
K1 momentum
K1 AR(2) process
K1 rational expectations
K1 news shocks
AB This paper establishes that frictionless, rational-expectations models driven by specific ARMA(2,1) forcing processes are consistent with equilibrium asset-price dynamics featuring momentum. To reach this result, we first document that AR(2) models adequately capture the cyclical dynamics found in U.S. house prices, in particular the strong positive first-order autocorrelation in their first difference. Then, we show analytically that ARMA(2,1) exogenous drivers give rise to equilibrium AR(2) asset-price dynamics in a simple present-value model. Our pen-and-paper approach yields a straightforward economic interpretation of the results, emphasizing the contribution of anticipated shocks to generating asset-price momentum. We document the empirical relevance of our theoretical results by estimating the model from house-price data. Our findings suggest that house-price momentum does not necessarily signal irrational exuberance or strong frictions in housing markets.
T2 TSE Working Paper
PB TSE Working Paper
PP Toulouse
AV Published
LK https://publications.ut-capitole.fr/id/eprint/48402/
UL http://tse-fr.eu/pub/128729