A multifractal detrended fluctuation analysis of housing market: a role of financial crises in developed economies

Abstract

Purpose

This study aims to examine the house price fluctuations in G7 countries by using the multifractal detrended fluctuation analysis (MF-DFA) for the years 1970–2019. The study examined the market efficiency between the short-term and long-term in the full sample period, before and after the global financial crisis period.

Design/methodology/approach

This study uses the MF-DFA to analyze house price fluctuations.

Findings

The findings confirmed that the housing market series are multifractal. Furthermore, all the markets showed long-term persistence in both the short and long-term. The USA is identified as the most persistent house market in the short run and Japan in the long run. Moreover, in terms of efficiency, Canada is identified as the most efficient house market in the long run and the UK in the short run. Finally, the result of before and after the financial crisis period is consistent with the full sample result.

Originality/value

The contribution of this study in the literature is fourfold. This is the first study that has examined the house prices efficiency by using the MF-DFA technique given by Kantelhardt et al. (2002). Previously, the house market prices and efficiency has been investigated using generalized Hurst exponent (Liu et al., 2019), Quantile Regression Approach (Chae and Bera, 2019; Tiwari et al., 2019) but no study to the best of the knowledge has been done that has used the MF-DFA technique on the housing market. Second, this is the first study that has focused on the house markets of G7 countries. Third, this study explores the house market efficiency by dividing the market into two periods i.e. before and after the financial crisis. The study strives to investigate if the financial crisis determines the change in the degree of market efficiency or not. Finally, the study gives valuable insights to the investors that will help them in their investment decisions.

Citation

Raza, S.A., Shah, N., Suleman, M.T. and Al Mamun, M. (2022), "A multifractal detrended fluctuation analysis of housing market: a role of financial crises in developed economies", International Journal of Housing Markets and Analysis, Vol. 15 No. 5, pp. 1145-1169. https://doi.org/10.1108/IJHMA-06-2021-0068