In this paper, we apply the theory of rational expectation bubbles proposed by Blanchard and Watson (1983) to the Chinese housing market. The theory implies that negative returns on house prices are less likely to occur if the bubbles exist. Based on data from 35 cities in China, we nd no evidence to support the existence of such bubbles in the Chinese housing market.
JEL-Codes: R31; E31.
Keywords: China house price; Rational expectation bubble; Hazard rate.