Signal Extraction with Kalman Filter: A study of the Hong Kong property price bubbles

Qin Xiao, Gee Kwang Randolph Tan

    Research output: Contribution to journalArticle

    20 Citations (Scopus)

    Abstract

    Since the early 1980s, the debate surrounding speculative bubbles has never subsided. A key obstacle to resolving this issue is the identification problem. A bubble is usually inferred from some assumed fundamental determinants of a price. These assumptions could be oversimplified. Furthermore, there might be data measurement errors. This paper attempts to capture such errors with a latent state variable. This variable is extracted using the Kalman filter. Based on the empirical comparisons, it is found that it is possible to attribute the observed large price swings in the property market of Hong Kong during the 1980s and 1990s to a periodically collapsing rational speculative bubble.
    Original languageEnglish
    Pages (from-to)865–888
    Number of pages24
    JournalUrban Studies
    Volume44
    Issue number4
    DOIs
    Publication statusPublished - Apr 2007

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    Kalman filter
    bubble
    Hong Kong
    property market
    determinants
    market
    price

    Keywords

    • rational speculative bubble
    • misspecification or measurement error
    • Kalman filter

    Cite this

    Signal Extraction with Kalman Filter : A study of the Hong Kong property price bubbles. / Xiao, Qin; Tan, Gee Kwang Randolph .

    In: Urban Studies, Vol. 44, No. 4, 04.2007, p. 865–888.

    Research output: Contribution to journalArticle

    Xiao, Qin ; Tan, Gee Kwang Randolph . / Signal Extraction with Kalman Filter : A study of the Hong Kong property price bubbles. In: Urban Studies. 2007 ; Vol. 44, No. 4. pp. 865–888.
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