Intercity Information Diffusion and Price Discovery in Housing Markets: Evidence from Google Searches

We provide an innovative measure of information flow in Chinese housing markets based on search records from the Internet search engine Google. The measure depicts a substantial flow of house-price related information from national “superstar” cities, such as Beijing and Shanghai, and regional “star” cities, such as Tianjin and Chongqing, to other “normal” cities. The empirical results based on Granger causality test and turning point detection analysis both suggest that such information diffusion is a key factor that influences the intercity house price discovery process in the short run. The “superstar” and “star” cities lead the country in terms newly-built house prices changes in the sample period between 2006 and 2011.