Mean Reversion in Housing Markets
Contributors: Glaeser, Edward L.; Campbell, John Y.; Laibson, David I.; Shleifer, Andrei
Published: 2014
Language: eng
Description: Booms in house prices are usually followed by busts. This pattern is called "mean reversion." Mean reversion in housing markets has historically coincided with economic recessions across the world. Chapter 1 establishes mean reversion in U.S. data, and attempts to explain it using the dynamics of wages in cities. Chapter 2 takes a different approach. It models mean reversion resulting from speculation and uncertainty. This model explains why strong mean reversion in prices occurs in cities where it is easy to build houses, a phenomenon that Chapter 1 cannot explain. Chapter 3 takes the spirit of Chapter 2 and applies it to the optimal design of the income tax.
Notes: Thesis Ph.D. Harvard University 2014