Is There A Periodically Collapsing Bubble In The Indian Real Estate Market?

Abstract

The study finds evidence in favor of Evans’ (1991) definition of periodically collapsing speculative bubbles in the Indian real estate market when the market is tested for a bubble by examining data from May 1, 2009, to May 30, 2012. Using consistent momentum threshold auto regressive (MTAR) model developed by Enders and Siklos (2001) with Chan’s (1993) methodology, this study finds evidence of co-integration as well as asymmetric adjustment toward long-run equilibrium, which is evidence of a periodically collapsing positive speculative bubble. However, except for the residuals-augmented Dickey–Fuller (RADF) test, none of the conventional tests such as the augmented Dickey–Fuller and the Phillips–Perron tests find evidence of a bubble.