Title: Leverage driven bubbles in the Chinese real estate corporate sector
Authors: Isabel Catalina Figuerola-Ferretti Garrigues - Universidad Pontificia Comillas (Spain) [presenting]
Abstract: Motivated by the recent default of Evergrandel, the existence of bubble behaviour in equity prices of the Chinese real estate sector is analyzed. A previous methodology is applied for this purpose. Using weekly data of the benchmark real state index and six of its components, we find that there are three predominant periods of bubble behaviour in 2015, 2017-2018, 2021-2022, that can be linked to the value of natural fundamentals, the real dividend yield, and the ten years Chinese Treasury yield. We offer an additional dimension to the analysis of fundamentals that allows an explanation of the bubble process in terms of leverage-related metrics. Our results highlight the stress in the Chinese real estate sector shedding light on the potential future strain in global financial markets.