The Journal of Real Estate Finance and Economics

, Volume 33, Issue 4, pp 329–344 | Cite as

The Q Theory and the Swedish Housing Market—An Empirical Test

  • Lennart Berg
  • Tommy Berger


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

Tobin’s Q Housing investment Error correction model Structural break 

JEL Classifications

E22 R21 


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Copyright information

© Springer Science + Business Media, LLC 2006

Authors and Affiliations

  1. 1.Department of EconomicsUppsala UniversityUppsalaSweden
  2. 2.The Institute for Housing and Urban ResearchUppsala UniversityGävleSweden

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