House Price in Taiwan is very volatile during the past few decades. As Taiwan go into enormous boom, more and more amount of money invest in the house market. Although house investment is considered as a good investment tool with low risk and inflation hedge properties, its risk can not be underestimated. Therefore, by using the GARCH model, this paper tries to analyze volatilities of investment return in the Taipei housing market from 1973 to 2002. For existing housing, we are not able to use GARCH to model investment volatility because of uncorrelated term risks. On the contrary, pre-sale housing contains correlated term risk. We adopt ARMA(4,4)-GARCH(1,1) to model the investment volatility of pre-sale housing. The investment risk of pre-sale housing is not constant but is time-varying. When an unexpected event happened, the shock will persist but decay from 86 percent in the next term to 40 percent in the sixth term. And we can observe volatility cluster phenomenon from the graph of conditional variance. During 1973 to 1975¡B1979 to 1983 and 1987 to 1990, the risks are higher than other period. Because previous studies commonly suggest some structural changes in the Taiwan housing market, we also control the risk premium affected by the structural changes in our model. We found ARMA(4,4)-GARCH(1,1) can still model the investment volatility process of pre-sale housing, but there is no evidence of risk premium caused by structural changes.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0803105-103131 |
| Date | 03 August 2005 |
| Creators | Li, Yu-jing |
| Contributors | none, none, none, Ming-Chi Chen |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | Cholon |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0803105-103131 |
| Rights | withheld, Copyright information available at source archive |
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