Predictability and Persistence of the Price Movements of the S&P/Case-Shiller House Price Indices

Posted: 21 Dec 2012

See all articles by Felix Schindler

Felix Schindler

Steinbeis University Berlin - Center for Real Estate Studies; ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management

Date Written: 2012

Abstract

This paper examines persistence in price movements and predictability of the US housing market both on a local level across 20 cities in the US and on a nationwide level. We use a time series approach instead of often applied multivariate approaches to exclude potential biases across markets and to test whether or not the detected persistence can be exploited by investors to earn excess returns. The results from the monthly and quarterly transaction-based S&P/Case-Shiller house price indices from 1987 to 2009 provide empirical evidence on strong persistence. This is confirmed by both parametric and non-parametric tests for nominal and real house prices based on expected inflation. Furthermore, the empirical findings suggest that investors might be able to obtain excess returns from both autocorrelation-based and moving average-based trading strategies compared to a buy-and-hold strategy, although the results depend on the transaction costs individual investors face.

Keywords: housing market, Times Series Model, predictability, persistence

JEL Classification: C22, C53, R30

Suggested Citation

Schindler, Felix, Predictability and Persistence of the Price Movements of the S&P/Case-Shiller House Price Indices (2012). Journal of Real Estate Finance and Economics, Vol. 46, No. 1, 2013. Available at SSRN: https://ssrn.com/abstract=2192128

Felix Schindler (Contact Author)

Steinbeis University Berlin - Center for Real Estate Studies ( email )

Berlin
Germany

ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management ( email )

Postfach 103443
Mannheim, D-68034
Germany

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