Abstract:
In this paper, the authors set out to date-stamp periods of US housing price explosivity
for the period 1830–2013. They make use of several robust techniques that allow them to
identify such periods by determining when prices start to exhibit explosivity with respect
to its past behaviour and when it recedes to long term stable prices. The first technique
used is the Generalized sup ADF (GSADF) test procedure developed by Phillips, Shi,
and Yu (Testing for Multiple Bubbles: Historical Episodes of Exuberance and Collapse
in the S&P 500, 2013), which allows the recursive identification of multiple periods
of price explosivity. The second approach makes use of Robinson’s (Efficient Test of
Nonstationary Hypotheses, 1994) test statistic, comparing the null of a unit root process
against the alternative of speced orders of fractional integration. The analysis date-stamps
several periods of US house price explosivity, allowing us to contextualize its historic
relevance.
