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House price dynamics and bank herding: European empirical evidence

Martins, A. M., Serra, A. P., Martins, F. V. and Stevenson, S., (2015) House price dynamics and bank herding: European empirical evidence. Working Papers in Real Estate & Planning. 01/15. Working Paper. University of Reading, Reading. pp51.

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This paper investigates the behavior of residential property and examines the linkages between house price dynamics and bank herding behavior. The analysis presents evidence that irrational behaviour may have played a significant role in several countries, including; United Kingdom, Spain, Denmark, Sweden and Ireland. In addition, we also provide evidence indicative of herding behaviour in the European residential mortgage loan market. Granger Causality tests indicate that non-fundamentally justified prices dynamics contributed to herding by lenders and that this behaviour was a response by the banks as a group to common information on residential property assets. In contrast, in Germany, Portugal and Austria, residential property prices were largely explained by fundamentals. Furthermore, these countries show no evidence of either irrational price bubbles or herd behaviour in the mortgage market. Granger Causality tests indicate that both variables are independent.

Item Type:Report (Working Paper)
Divisions:Henley Business School > Real Estate and Planning
ID Code:40503
Uncontrolled Keywords:House Prices; Mortgages; Price Bubble; Herding Behavior
Publisher:University of Reading
Publisher Statement:The copyright of each paper remain with the author. If you wish to quote from or cite any paper please contact the appropriate author. In some cases a more recent version of the paper may have been published elsewhere.


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