The volatility of house prices can raise systemic risks in the housing market due to the vulnerability of the banking and mortgage sectors to such fluctuations. Moreover, the extreme increases in housing markets have been considered a key feature of the last economic crisis and the run-up to it. Such increases, however, came to a sudden halt immediately before the crisis or directly it began. Despite the recent growth of scholarly work on the role of house price behaviour in economic stability, fundamental questions have yet to be answered: for instance: (i) how far do the nonlinear models outperform the linear models? And how does such nonlinearity explain the asymmetry in the cycle; (ii) what are the main characteristics of house price cycles, and how do they differ over time; and (iii) what kind of policy intervention would stop a real estate boom? This thesis, made up of three empirical essays, aims to take a step forward in answering these questions. The first essay examines whether house prices in large metropolitan areas such as London, New York and Hong Kong follow linear or nonlinear models. The Smooth Transition Autoregressive model was used on a sample of monthly data over the period 1996:1 to 2015:12. The results indicate that linear models are unsuitable for modelling the housing market for the chosen cities. Moreover, strong evidence indicates that real estate prices are largely nonlinear and can well be modelled using a logistic smooth transition model (LSTAR). Estimation results also show different degrees of asymmetry. In particular, the speed of transition between the expansion and contraction of house prices is greater in London than it is in Hong Kong while the speed of transition between boom and bust in New York house prices is the slowest. Further, the forecast results suggest that the LSTAR outdoes the linear model in out-of-sample performance. The second essay investigates the main features of house price cycles in the same major metropolitan areas by providing a reasonable level of discrimination between the cyclical decomposition techniques available for capturing suitable measurements for house price cycles. Through a sample of large cities in several countries, it is shown that the model-based filter is suitable for capturing the main features of house price cycles and the results confirm that these cycles are centred at low frequency. Moreover, there is evidence of substantial variation in the duration and amplitude of these cycles both across cities and over time. The third essay provides evidence that real house prices are significantly affected by financial stability policies. Considering the Hong Kong experience, the results show strong evidence of duration dependences in both the upswing and downswing phases of the cycle. Moreover, the time taken to reach the turning point increases dramatically as the cycle proceeds. The findings also suggest that there is feedback between house price volatility and the policies that affect the housing market. Accordingly, house prices respond with more volatility to any change in the loan to value and lending policy indicators (ignoring the sign of this shock). Finally, the evidence of asymmetry suggests that unanticipated house price increases are more destabilising than unanticipated falls in house prices.

[pt] Esta tese é composta por três estudos que têm em comum um papel destacado para choques de demanda na avaliação do risco de ações. O primeiro estudo avalia se ações que apresentam volume anormalmente alto têm um maior retorno nas semanas seguintes, sem necessariamente maior risco, como relatado anteriormente na literatura. Diferentemente de resultados precedentes, o estudo mostra que o risco sistemático pode explicar parcialmente o maior retorno de uma carteira formada com ações que apresentam volume anormalmente alto. Porém, também mostra que a correlação com o retorno do mercado não é suficiente para explicar o maior retorno da carteira de maior volume. O segundo estudo avalia se retornos acumulados afetam a resposta da volatilidade a choques de retorno. Foi verificado que sim. Este resultado é atribuído a viés comportamental que, atenuaria o impacto dos choques positivos, sobre a volatilidade, quando o retorno acumulado e corrente são negativos, mas amplificaria o impacto dos choques negativos, quando o retorno acumulado e corrente são negativos. O estudo apresenta evidência empírica que suporta esta explicação. O terceiro estudo, motivado por literatura recente que mostra a relevância da assimetria das distribuições de retornos de ações na avaliação de risco, procura identificar determinantes da assimetria. Além das variáveis explicativas identificadas pela literatura precedente, o estudo mostra que o ganho de capital e uma variável proposta como proxy para a freqüência de incorporação de novidades aos preços afetam a assimetria da distribuição de retornos de ações de maneira estatisticamente significativa e com os sinais conjecturados. / [en] This thesis consists of three essays which have in common the role of demand shocks in the evaluation of stocks risk. The first essay evaluates whether stocks that present abnormal high volume have a greater return in the following weeks, which is not necessarily linked to higher risk, as previously reported in financial literature. Contrary to previous results, the essay shows that systematic risk may partially explain the greater return of the portfolio formed with stocks that present abnormally high volume. However, it also shows that the correlation with market return is not sufficient to explain the greater return of the high volume portfolio. The second essay evaluates whether cumulative returns affect the response of volatility to return shocks. The result was affirmative, and attributed to behavioral bias, that attenuates the impact f positive shocks, when cumulative and current return are positive, and amplifies the impact of negative shocks, when cumulative and current return are negative. The essay also provides empirical evidence supporting this explanation. The third essay, motivated by recent literature that shows the relevance of skewness of returns distribution to risk evaluation, aims the identification of skewness determinants. Besides explanatory variables identified by previous literature, the essay shows that capital gain and a variable proposed as proxy for the frequency of information incorporation into prices affect the skewness of stocks returns distribution, with statistical significance and conjectured signs.

本研究顯著地發展時間轉換Lévy過程在最適投資組合的運用性。在連續Lévy過程模型設定下，槓桿效果直接地產生跨期波動度不對稱避險需求，而波動度回饋效果則透過槓桿效果間接地發生影響。另外，關於無窮跳躍Lévy過程模型設定部分，槓桿效果仍扮演重要的影響角色，而波動度回饋效果僅在短期投資決策中發生作用。最後，在本研究所提出之一般化隨機波動度不對稱資產報酬動態模型下，得出在無窮跳躍的資產動態模型設定下，擴散項仍為重要的決定項。 / This study significantly extends the applicability of time-changed Lévy processes to the portfolio optimization. The leverage effect directly induces the intertemporal asymmetric volatility hedging demand, while the volatility feedback effect exerts a minor influence via the leverage effect under the pure-continuous time-changed Lévy process. Furthermore, the leverage effect still plays a major role while the volatility feedback effect just works over the short-term investment horizon under the infinite-jump Lévy process. Based on the proposed general stochastic asymmetric volatility asset return model, we conclude that the diffusion term is an essential determinant of financial modeling for index dynamics given infinite-activity jump structure.