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- Title
Systemic risk and spatiotemporal dynamics of the US housing market.
- Authors
Hao Meng; Wen-Jie Xie; Zhi-Qiang Jiang; Boris Podobnik; Wei-Xing Zhou; Stanley, H. Eugene
- Abstract
Housing markets play a crucial role in economies and the collapse of a real-estate bubble usually destabilizes the financial system and causes economic recessions. We investigate the systemic risk and spatiotemporal dynamics of the US housing market (1975-2011) at the state level based on the Random Matrix Theory (RMT).Weidentify richer economic information in the largest eigenvalues deviating from RMT predictions for the housing market than for stock markets and find that the component signs of the eigenvectors contain either geographical information or the extent of differences in house price growth rates or both. By looking at the evolution of different quantities such as eigenvalues and eigenvectors, we find that the US housing market experienced six different regimes, which is consistent with the evolution of state clusters identified by the box clustering algorithm and the consensus clustering algorithm on the partial correlation matrices. We find that dramatic increases in the systemic risk are usually accompanied by regime shifts, which provide a means of early detection of housing bubbles.
- Subjects
UNITED States; HOUSING market; HOME prices; RECESSIONS; EIGENVALUES; EIGENVECTORS; STOCK exchanges
- Publication
Scientific Reports, 2014, p1
- ISSN
2045-2322
- Publication type
Article
- DOI
10.1038/srep03655