New Information, Expectation Revisal and the Volatility of Urban Housing Market in China

New information (i.e. news) can make investors update their expectations, and then the markets fluctuate. We apply the dynamic Gordon growth model to the urban housing markets in China. Unexpected returns suggest that the investors change their expectations of future rents and discount rates. It implies that new information exists. In quarterly data in Beijing, Shanghai, Guangzhou, and Shenzhen, future rent news accounts for a more significant fraction of unexpected return volatility than discount rate news. The influences of covariance among rent news and discount rate news can't be ignored too. This empirical evidences may direct future studies of China`s housing prices movement route.