THE STUDY OF COE PRICING TRENDS

Abstract

The purpose of the Vehicle Quota System is to control the vehicle population growth rate. It gives a price to car ownership. Chapter l will look at the need for such a radical system. In addition to that, it highlights the various aspects of the system and an insight to how the system works. We have observed that quota premiums have been rising to alarming levels. Thus, it became interesting to study the price volatility of COEs. It is essential to look at the factors that affect the COE price changes. Chapter 2 gives a brief report of the factors that contribute to the COE price changes in the monthly tender exercise. The factors gathered from Chapter 2 have been categorized into two main groups: the quantifiable and non quantifiable ones in Chapter 3. Moreover, the demand and supply mechanism of the system is introduced. Chapter 4 highlights some of the factors that are not quantifiable. The psychological aspect of consumers' demand for vehicles is explained by the Katona's model. The Singapore Paradox also helps to identify the consumers' purchasing pattern and their expectations of life. Other aspects like the transferability and speculation, and the motor dealers' effect on the COE prices is also mentioned in this chapter. A simple multiple linear regression model is shown in Chapter 5. Some quantifiable factors have been used in the model. However, I would like to stress again that such econometric model might not be effective in analyzing data as such. There are limitations in the model mainly due to the fact that assumptions of the model may not be true and the fact that the volatility of the quota premium is affected by both quantifiable factors and non-quantifiable ones. The final chapter summarizes for all the chapters.