A test of the efficiency of housing market based on fractal theory

This study considers the efficiency of housing markets in Shanghai, China based on some approaches of fractal theory. Specifically, we examine the housing markets via a test by R/S (rescaled range) analysis and a Hurst exponent computation. With recent housing price indices of Shanghai in China Real Estate Index System (CREIS), we calculate Hurst exponent of housing markets in shanghai using an R/S analysis and find the persistence in the return of housing markets, which means that positive excess return is more likely to be continued. Our results support the existence of a fractal structure in the housing markets, which indicates that the markets do not follow a random walk. So we draw the conclusion that the housing markets in Shanghai are not efficient.