House Prices as a Result of Trading Activities: A Patient Trader Model

Korn R., Yilmaz B.

Computational Economics, vol.60, no.1, pp.281-303, 2022 (SCI-Expanded) identifier identifier

  • Publication Type: Article / Article
  • Volume: 60 Issue: 1
  • Publication Date: 2022
  • Doi Number: 10.1007/s10614-021-10149-y
  • Journal Name: Computational Economics
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Social Sciences Citation Index (SSCI), Scopus, IBZ Online, International Bibliography of Social Sciences, ABI/INFORM, EconLit, INSPEC, zbMATH
  • Page Numbers: pp.281-303
  • Keywords: Patient trader, Housing market, Quantile process, MARKETS, DEFAULT
  • Middle East Technical University Affiliated: Yes

Abstract

© 2021, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.We present a new modeling approach for house price movements as a consequence of the trading behavior of market agents. In our modeling approach, all agents are assumed to assign a personal threshold value to a (standardized) house and update the threshold value permanently by a continuous-time filtering procedure based on observing the quoted house prices and the resulting price movements. The traders then trade according to a threshold price strategy (try to sell if the personal threshold value is lower, try to buy if the personal threshold value is higher than the actually quoted house price). Our modeling approach and its resulting characteristics are illustrated via numerical examples that highlight certain realistic constellations between various traders.