New article on The Q Theory and the Swedish Housing Market - An Empirical Test

A new article by Lennart Berg and Tommy Berger in The Journal of Real Estate Finance and Economics

2006 The Q Theory and the Swedish Housing Market - An Empirical Test, The Journal of Real Estate Finance and Economics, Vol. 33, Number 4, pp. 329-344.

Abstract
We argue that major changes in economic policy have resulted in a more market driven demand for housing investment in Sweden, due to policy changes at the end of the 1980s and the beginning of the 1990s. Tobin's transparent Q theory is the investment theory used. For the last period of the sample (1993-2003 quarterly data), our results indicate that there exists a high degree of correlation between the Q ratio and the (logarithm of) two different variables for housing investment. An error correction regression model, controlling for structural breaks, also indicates that a stable long-run relationship could be detected for the logarithm of building starts and the Q ratio between 1993-2003, but not between 1981-1992.

Key words: Tobins Q – Housing investment – Error correction model – Structural break