<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>While prior studies have examined the predictive effect of macroeconomic and country risk components on property stock index dynamics, limited explanations exist in the literature regarding the time-varying effect of investor sentiment on housing prices. Accordingly, this study assesses the impact of investor sentiment on housing properties’ returns and the effect of investor sentiment on the conditional volatility of housing price indices under different market conditions, using GARCH, GJR-GARCH, E-GARCH and Markov-switching VAR models. We found investor sentiment to significantly impact the risk premium of the property returns, where property returns increased with positive changes in investor sentiment, and conditional volatility of property returns decreased with the same changes in investor sentiment. Investor sentiment exerts positive predictive influences on the prices of small and medium houses, in both bullish and bearish market conditions but does not affect the large housing market segment. This makes the implementation of risk-related diversification across small and medium real estate portfolios more effective than large real estate portfolios. Our findings show that investor sentiment is a plausible driver of mass investor redemption actions under conditions of uncertainty.</p>
</abstract>

While prior studies have examined the predictive effect of macroeconomic and country risk components on property stock index dynamics, limited explanations exist in the literature regarding the time-varying effect of investor sentiment on housing prices. Accordingly, this study assesses the impact of investor sentiment on housing properties’ returns and the effect of investor sentiment on the conditional volatility of housing price indices under different market conditions, using GARCH, GJR-GARCH, E-GARCH and Markov-switching VAR models. We found investor sentiment to significantly impact the risk premium of the property returns, where property returns increased with positive changes in investor sentiment, and conditional volatility of property returns decreased with the same changes in investor sentiment. Investor sentiment exerts positive predictive influences on the prices of small and medium houses, in both bullish and bearish market conditions but does not affect the large housing market segment. This makes the implementation of risk-related diversification across small and medium real estate portfolios more effective than large real estate portfolios. Our findings show that investor sentiment is a plausible driver of mass investor redemption actions under conditions of uncertainty.

The Impact of Investor Sentiment on Housing Prices and the Property Stock Index Volatility in South Africa

Real Estate Management and Valuation

This work is licensed under the Creative Commons Attribution 4.0 International License.

While prior studies have examined the predictive effect of macroeconomic and country risk components on property stock index dynamics, limited explanations...

The Impact of Investor Sentiment on Housing Prices and the Property Stock Index Volatility in South Africa

Published Online: Jun 09, 2023

Page range: 1 - 17

Received: Jun 02, 2022

Accepted: Sep 27, 2022

DOI: https://doi.org/10.2478/remav-2023-0009

Keywords
housing prices, property index, investor sentiment, ADCCGARCH, MS-VAR

© 2023 Paul-Francois Muzindutsi et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

The Impact of Investor Sentiment on Housing Prices and the Property Stock Index Volatility in South Africa

Published Online: Jun 09, 2023

Page range: 1 - 17

Received: Jun 02, 2022

Accepted: Sep 27, 2022

DOI: https://doi.org/10.2478/remav-2023-0009

Keywordshousing prices, property index, investor sentiment, ADCCGARCH, MS-VAR

© 2023 Paul-Francois Muzindutsi et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
housing prices, property index, investor sentiment, ADCCGARCH, MS-VAR