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Article: The Forecasting Capacity of Housing Price Expectations Authors: Eddie C. M. Hui and Joe T. Y. Wong Start Page: 39 Abstract: This study captures the essential elements of the price expectations of
market participants in a rising market. Adopting a forward-looking approach,
this paper explores the effectiveness of expectations as an indicator of
forthcoming housing price changes in Hong Kong. Examination of the
quarterly survey data from December 2003 to September 2007 indicates that
both homeowners and non-homeowners tend to overestimate the probability
of future housing price increases yet underestimate its volatility. This adds
weight to the argument that market participants are generally not rational in
the prediction of price movement. Homeowners, investors and potential
home buyers have more or less the same level of confidence about the future
market outlook. Like non-owners, they expect higher prices. The number of
correct forecasts exceeds incorrect forecasts, suggesting that overall price
expectations are fairly close to realization. It can be broadly concluded that
the aggregate price expectations in the long run can be an appropriate
forecasting tool for future market performance. |
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