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Dynamic relationship between investor attention and house prices: Evidence from Australian housing market

Author/s: Thi Tuyet Anh Nguyen, Garrick Small, Lan Sun, Steven Boyd

Date Published: 12/02/2025

Published in: Volume 29 - 2024 Issue 3 (pages 28 - 48)

Abstract

This paper examines the interrelationships between investor attention and house prices. We find that investor attention significantly influences house prices in both short term and long term. Conversely, significant changes in house prices heighten investor attention, leading to increased market activity. This reciprocal relationship between investor attention and house prices is confirmed through VAR model analysis. Granger causality tests, variance decomposition and impulse response functions were also used to investigate the dynamic of the variables in the empirical model. Our findings have several implications for policymakers, real estate investors, and market analysts. Policymakers should focus on managing short-term volatility in house prices to stabilise investor behaviour, while investors should avoid overreacting to short-term price movements. The study findings suggest that incorporating behavioural factors into economic models can enhance our understanding and improve the prediction of housing market trends.

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Dynamic-Relationship-Between-Investor-Attention-And-House-Prices_-Evidence-From-Australian-Housing-Market.pdf Dynamic-Relationship-Between-Investor-Attention-And-House-Prices_-Evidence-From-Australian-Housing-Market.pdf (316kB)

Keywords

Australia - Granger Causality - House Price - Housing - Investor Attention - Var

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