RT Journal Article
SR 00
A1 Fève, Patrick
A1 Moura, Alban
T1 Frictionless house-price momentum
JF Journal of Economic Dynamics and Control
YR 2024
FD 2024-11
VO vol. 168
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) processes can produce equilibrium asset-price momentum, defined as persistent movements in asset-price changes. To demonstrate this, we first document that AR(2) models adequately capture the dynamics observed in U.S. house prices, particularly the strong persistence of their first differences. Next, we show that ARMA(2,1) dividends can lead to equilibrium AR(2) asset-price dynamics within a simple present-value model. Our analytical approach provides an economic interpretation of the results, highlighting the role of anticipated shocks. Finally, we document the empirical plausibility of our theory by estimating the model using house-price data. Our analysis suggests that house-price momentum does not necessarily signal irrational exuberance or significant frictions in housing markets.
PB Elsevier
SN 0165-1889
LK https://publications.ut-capitole.fr/id/eprint/49874/
UL http://tse-fr.eu/pub/128729