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The Study on the Relationship between Investor Sentiment and Home Prices

Lee, Sangjun 1 Jin, Chang Ha 2

1한국국제협력단
2한양대학교

Accredited

ABSTRACT

We examine the relationship between consumer sentiment and residential housing price. Using Vector Autoregressive (VAR) model, we derive a determinant model on sentiment index with macro economics variables. Results indicate that the sentiment index is affected by price of Cheonsei, consumer price index, housing construction and exchange rate. After decomposing sentiment index into rational (explained by macro economic variables) and irrational (unexplained residual) component, we find that both rational and irrational component has influenced housing price index. We adopt the BDS test to reduce a possible bias from omitted variables in which we strengthen the robustness on decomposing rational and irrational component. Additionally, impulse response test suggests that change in rational and irrational sentiment has asymmetric effect on residential housing market.

Citation status

* References for papers published after 2022 are currently being built.