An Empirical Test Of Shanghai Real Estate Market Efficiency

The real estate market is an important part of the economic system. It attracts plenty of investors because of the great value and profit, which promotes the economy development, but at the same time, the influx of the investment and speculation also makes the real estate price increased. This phenomenon has great benefit to Chinese economy on one hand, but on the other hand, the soaring price brings severe housing problem to the low-income groups. So it is meaningful to test the efficiency of the real estate market and have a good knowledge of how the real estate price reflects the information.This paper researches on the shanghai real estate market and tests whether the market has arrived the weak form efficiency by using random work model. This paper collects the quarterly data of shanghai real estate market from the first quarter of2005to the last quarter of2013, and divides the real estate market into the new housing market and the secondary housing market. And then analyze the weak form efficiency of each market by using unit root test and serial correlation test. To test the weak form efficiency of the new housing market, this paper selects the four groups of index including city composite index, resident index, office index and retail index. In the test of the secondary housing market, sales price index and rental price index are to be used. In total216test data. The result of the unit root test shows that in the new housing market, except the housing market, office market and retail market have reached the weak form efficiency. While in the secondary housing market, rental market has reached the weak form efficiency, sales market has not. The serial correlation test demonstrates that each of the segments has not reached the weak form efficiency. Combined the two empirical tests, we can make a conclusion that the shanghai real estate price does not follow the random walk model, which means shanghai real estate market has not reached the weak form efficiency yet. So investors can obtain additional profit in shanghai real estate market by making investment strategies.Based on the empirical test of shanghai real estate market, we know that real estate price cannot reflect the historical information timely and completely. In order to explain the reaction degree of the real estate price to the information, this paper uses VAR Model to test how the shanghai housing price reflects the change of land transactions, real estate investment, residents per capita disposable income and GDP. With total90sets of annual data from1995to2012. The result of cointegration test shows that in a long term, shanghai housing price is much more sensitive to residents per capita disposable income and GDP, while vector error correction model indicates that in a short term, land transactions and real estate investment influence the price more significantly. Furthermore, by using impulse response and variance decompositions to analyze the influence of each variable to real estate price after the impact, we can see that residents per capita disposable income and GDP has greater effect than the other two variables, and the influence becomes weaker with time goes.