Quantitative easing and asset bubbles

Huston, John H.; Spencer, Roger W.

doi:10.1080/13504851.2017.1324604

Cited by 15 publications

(15 citation statements)

References 3 publications

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“…To the best of our knowledge only Huston and Spencer (2017) apply the GSADF test in the context of Quantitative Easing and explosive price behavior for several asset classes.…”

Section: B Applications Of the Gsadf Procedures To Identify Bubblesmentioning

confidence: 99%

Quantitative Easing and Exuberance in Government Bond Markets: Evidence from the ECB's Expanded Asset Purchase Program

2017

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SUMMARY -This paper examines whether the ECB's Quantitative Easing (QE) policy is causing government bond prices to deviate from their fundamental value.We use a recent advance in the methodology to measure exuberant price behavior in financial time series introduced by Phillips et al. (2015). We extend this methodology and apply it to government bond prices. The results show that the QE policy substantially inflated government bond prices in Euro Area countries to such an extent that bond prices are no longer in line with the underlying fundamental value. We argue that careful monitoring is required when the QE policy is eventually reversed. The test procedure outlined in this paper provides a monitoring tool to do so.JEL-code -G12; G15; E52

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“…To the best of our knowledge only Huston and Spencer (2017) apply the GSADF test in the context of Quantitative Easing and explosive price behavior for several asset classes.…”

Section: B Applications Of the Gsadf Procedures To Identify Bubblesmentioning

confidence: 99%

Quantitative Easing and Exuberance in Government Bond Markets: Evidence from the ECB's Expanded Asset Purchase Program

2017

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“…Scherbina and Schlusche (2012) argued that residential real estate markets are dominated by financially unsophisticated households, whose optimistic view of capital appreciation is guided by the presence of momentum, extrapolated from past returns. In the same spirit, Huston and Spencer (2017) provide evidence that momentum, expectations of future increases, that is, "prices are low," and speculative interest in the markets are all significant factors influencing housing prices.…”

Section: Literature Reviewmentioning

confidence: 91%

Homeownership motivation, rationality, and housing prices: Evidence from gloom, boom, and bust‐and‐boom economies

Alexiou

Chan

Vogiazas³

2018

Int. J Fin Econ

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By focusing on three types of homebuyers, we address three questions: (a) Do households drive housing prices? (b) Do households and landlords act rationally in their buying decisions? (c) Is the market conducive to promoting homeownership or is it a speculators' territory? We use system Generalized Method of Moments (GMM) estimations based on 1970–2016 data, for 34 economies clustered as gloom, boom, or bust‐and‐boom, and we provide novel evidence that all three types of homebuyers contribute significantly to the determination of housing prices. Households and landlords seem to act irrationally as their decisions are not greatly affected by housing affordability or shrinking yields.

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“…First, we focus on equity markets in the euro area, whereas previous literature has only considered other jurisdictions. Huston and Spencer (2018) find that US stock prices and house prices have increased above their fundamental value as a side effect of QE, but they find no evidence of exuberance in the stock and housing market price dynamics. 9 Other papers examine the effect of QE on equity markets, but do not relate the effect to exuberance (see Chen et al, 2016;Haitsma et al, 2016;Hattori et al, 2016;Claus et al, 2018;Al-Jassar and Moosa, 2019).…”

Section: Introductionmentioning

confidence: 90%

Quantitative Easing and Exuberance in Stock Markets: Evidence from the Euro Area

2019

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Quantitative easing and asset bubbles

Cited by 15 publications

References 3 publications

Quantitative Easing and Exuberance in Government Bond Markets: Evidence from the ECB's Expanded Asset Purchase Program

Quantitative Easing and Exuberance in Government Bond Markets: Evidence from the ECB's Expanded Asset Purchase Program

Homeownership motivation, rationality, and housing prices: Evidence from gloom, boom, and bust‐and‐boom economies

Quantitative Easing and Exuberance in Stock Markets: Evidence from the Euro Area

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