Theses and Dissertations

Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)



First Advisor

Dr. Diego Escobari

Second Advisor

Dr. Binay K. Adhikari

Third Advisor

Dr. Yu Liu


Essay I examines the role of macroeconomic fundamentals in explaining the explosive behavior or price exuberance in the US local housing markets. Using monthly observations between November 1997 and December 2016 we employ the double recursive approach from Philips et al., (2015) to identify the emergence of price exuberance in each of the 291 U.S. Metropolitan Statistical Areas in the sample. Our estimations results show that population and income per capita have a significant positive effect on price exuberance, while unemployment rate and fixed mortgage interest rate have a negative effect. The marginal impacts of these macro fundamentals on housing price exuberance are also economically significant. We argue that the effect of fundamentals is important to study exuberance and price volatility in the housing market and cannot ignore the regional heterogeneity.

Essay II studies whether market fundamentals and price exuberance affect contagion between housing markets and contagion between stocks and housing markets. We propose a framework where we first estimate the dynamic conditional correlations to characterize contagion. In a second step we identify and date-stamp periods of explosive pricing behavior in each of the markets. In a third step we estimate various dynamic panel specifications that controls for the potential endogeneity of price exuberance to assess its effect on contagion. Our results using nine MSAs and the S&P 500 show that periods of price explosiveness increase contagion between housing markets but decrease contagion between housing markets and stocks. Our macro fundamentals (i.e., income, population, housing starts, change in employment and unemployment rate) also showed to explain contagion across housing markets. We explain the implications for household, investors, and regulators.


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