Housing market sentiment and intervention effectiveness: Evidence from China |
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| Affiliation: | 1. Department of Finance, John Molson School of Business, Concordia University, 1455 Blvd. de Maisonneuve West, Montréal, QC H3G 1M8, Canada;2. Department of Economics and Finance, University of New Orleans, New Orleans, LA 70148, USA;3. College of Business and Public Management, University of La Verne, 1950 Third St., La Verne, CA 91750, USA;1. Department of Banking & Financial Management, University of Piraeus, Greece;2. Business School, University of New South Wales, Australia;1. Institute of Chinese Financial Studies, Southwestern University of Finance and Economics, China;2. Collaborate Innovation Center of Financial Security, Southwestern University of Finance and Economics, China;3. School of Finance, Nankai University, China;1. Department of Investment, School of Public Economics and Administration, Shanghai University of Finance and Economics, Shanghai 200433, China;2. Department of Economics, College of Economics, Jinan University, Guangzhou 510632, China;3. Hollo School of Real Estate, College of Business, Florida International University, United States |
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| Abstract: | This paper studies the interaction between housing market sentiment and government interventions. With a unique micro-level data from China, we construct a housing market sentiment index by applying the techniques in the finance literature. This index is significantly correlated with the confidence indexes from official sources. We find that housing market returns increase with contemporaneous sentiment, and high sentiment is followed by low returns. Tightening policies cannot reduce optimism, and high sentiment negatively impacts the effectiveness of tightening policies. This negative impact is especially significant in the zones where housing prices are sensitive to increasing sentiment. |
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