Theory And Empirical Analysis Of Real Estate Market Efficiency

On the process of China monetization and marketing reform of real estate industry, housing-based real estate industry had played an important role in fueling economic growth and improving domestic dwelling level. With the fast development of real estate industry, a series of problems appeared at the same time, especially the overvalued housing price and the rapid price growth. As a significant part of the basic necessities of living, the real estate is not only an economic issue, but also a part related to the people's livelihood which would be associated to the social stability. The lasting and rapid housing price growth, will not only increase the difficulty for solving the dwelling problem through market mechanism, but also drive excessive social capital to the real estate industry and amplify the virtual traits of the real estate so as to accumulate the market risk under the limitation of the aggregate of resources. In addition, the proliferation of speculative ventures in real estate industry would disturb the order of the market severely, induce the varieties of illegal behavior and damage the integrity of market mechanism. And currently, while the shadow of international financial crisis didn't vanish completely, the appreciation pressure on the RMB had revived. Under the regulated financial market in China, the real estate realm becomes an all-important choice for offshore capital funds.By speculation in China real estate market, the cross-border funds could enjoy the benefits of RMB appreciation and lucrative profits in the real estate market. From "NEW EIGHT Dharma" in 2005 to "Purchase Limitation Order" in 2011, the government had already put forward a serial of policy to avoid the risk accumulation of real estate market and control the rapid housing price growth motivated by investment demand, especially the speculative behavior. It is thus clear that guiding the rational investment in the market and refraining the speculation have already been an major issue to make China real estate market develop healthy and stably so as to ensure the long lasting prosperity.Over the past years, the real estate market is often highly unprovenly believed that is efficiency. However, many real estate market analytical models had the premise of market efficiency. The efficiency study related to the domestic market, would mainly focus on the financial market. By contrast, very few scholars would study the effectiveness or look directly toward the real estate market. At present, the attribute of real estate investment has become increasingly prominent, and the accumulation of available data can be analyzed for the real estate market efficiency. We should conduct a systematic study which has both practical necessity but also feasible.This paper would apply the capital market theory with the real estate development theory, to study the information effectiveness in the real estate market systematically in both theoretical and empirical way. We will discuss the internal origin of the China real estate investment and the overheating of speculative demand behavior concurrently, relevant features of fluctuations in prices and the possible impact on the macroeconomic stability.On the basis of survey, comparing and reviewing for literatures both at home and abroad about the real estate realm, the real estate market weak effectiveness will be systematically discussed by empirical analysis in this paper. This paper will investigate the historical price information influence on the market price. Based on the above studies, this paper will examine the trans-regional correlative influence of China urban real estate market. We then gradually reduce the sampling scale, and adopt the space econometrics methods to inspect the spatial lag interaction among typical cities within one region and the Neighboring cities. We compare the impact strength of its own lagged price effects with the spatial diffusion effects for the regional market, so as to reveal the spatial and temporal changes for price characteristics in China real estate market.Secondly, on account of the present value model of the capital price, the paper will investigate the impact of the public leasing and sales price ratio information on the real estate excessive expected earnings. Meanwhile we will test the Semi-strong efficiency of real estate market. Furthermore, this paper would also construct the public information system including the macro-economy fundamental indexes such as the construction cost, per capita GDP and CPI. This paper will study the reflective responses of the real estate market price to the different public and macro-economic fundamental information and the time-varying characteristics. And by investigating the adjustment speed of various regional real estate market prices to the long equilibrium term, we will deeply understand the semi-strong efficiency of the China real estate market.More systematic empirical research shows that neither the real estate market in general is weak or semi-strong form efficient. But the national real estate market is not a simple sum of the regional market related to the effectiveness of the market. The significant differences which reflected in many respect, include the weak efficiency in regional level of the related urban real estate markets, the different cross-lagged effects according to the distances between the cities in different regions. And part of the urban real estate market prices can adjust to public information and economic fundamentals rapidly, and some slowly. Some urban city prices move to the long-run equilibrium relationship adjustment very slowly, so as to gather the real estate asset bubble quickly.Nowadays, China real estate market with its various rules and operation mechanism are founded with the rapid development of the industry after reforming and the opening-up. China real estate market in general is a kind of non-effectiveness partly because the inherent reason of real estate products, such as information asymmetry induced by the natural heterogeneous and the difficulties of asset evaluation. Another reason is the short development history of China real estate market, which is different from the developed countries. The related factors include the regional monopoly and the sticky price due to the market information, man-made market noise and excessive investment. And we also lack the institutional investors who invest based on basic values. These factors will all affect the market supply and demand.Based on the more systematic empirical analysis, this paper will make a overall analysis about the effectiveness of the real estate market and the related resource allocation. Furthermore, we will combine the real estate micro-market structure study drawing on the theories of behavioral finance and indicate the main factors of the supply and demand in depth especially about their behavioral characteristics. According to current effectiveness of the overall situation of China real estate market, we will study the potential impact of short capital inflows on the real estate market. Related researches will not only help improving our understanding of the market imbalances between supply and demand structure, but also the reflection to the information sets. The results can help us to know the over-or lack of vigorous speculation in markets, while we can raise the suggestions of the practical macroeconomic policy measures to guide rational investment. We can difinitly prevent the real estate speculative investment caused by the rapid increases of the unrational behavior to promote housing market risk accumulation. We can also solve the difficult housing problems of various classes, and maintain the financial stability and promote the harmonious society in practice.The paper mainly includes three parts. Part 1 covers introductory chapter, including background, research methods and path, innovation and so on. The literature survey covers in the chapter two. Part 2 includes the third, fourth, fifth and sixth chapters. The third chapter start from the characteristics of weak form efficiency empirical analysis of the real estate market applying the time series empirical method. The fourth chapter study the weak efficiency from the spatial diffusion direction of the China real estate market. The fifth chapter is based on public macro-economic information facing to the real estate market, to test the semi-strong effectiveness applying the proper empirical study. The sixth chapter is the research combining the real estate market effectiveness and the financial economic basis. Part 3 is the overall conclusions of the chapter seven and the policy suggestions.