Study on housing market efficiency: Evidence from Hong Kong

Hong Kong housing market is probably one of the most efficient markets in the world because of its transparent transaction information, relatively low trade cost and multiple brokerage shops. This paper performs the test on the weak-form informational efficiency of the Hong Kong housing market and explores the causes. The augmented Dickey-Fuller and Phillips-Perron unit root tests are applied to examine the auto-correlation of the housing price index and returns index in the short-run respectively. This paper adopts unique transaction-based data and covers a longer period from 1984 to 2005. The results show the exhibition of the serial dependency of the housing price and returns and the weak-form efficiency hypothesis is rejected. It also indicates that the lack of transaction information and the agencies as well as high trade cost may not be the direct reasons for the inefficiency of the housing market.