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Do Malaysian house prices follow a random walk? Evidence from univariate and panel LM unit root tests with one and two structural breaks

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In this article we apply univariate and panel Lagrange Multiplier (LM) unit root tests with one and twostructural breaks proposed by Lee and Strazicich (2003, 2004) and Im et al. (2005) to examine housing prices for five different housing price indices (all housing, detached housing, semi-detached housing, terrace housing and high-rise housing) in 14 states of Malaysia to test whether housing prices exhibit a random walk. Our main finding from the univariate LM unit root tests is that for the vast majority of states housing prices follow a stationary process about a segmented trend. The results of the panel LM unit root tests provide overwhelming evidence that house prices are segmented trend reverting.
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Keywords: Asia; G12; R31; housing prices; random walk; trend reversion

Document Type: Research Article

Affiliations: 1: School of Social Sciences, USM 11800, Malaysia 2: Department of Economics, Monash University, 900 Dandenong Road Caulfield East 3145, Australia

Publication date: 2013-06-01

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