Information Content and Forecasting Ability of Sentiment Indicators: Case of Real Estate Market

48 Pages Posted: 27 Aug 2014

See all articles by Gianluca Marcato

Gianluca Marcato

Henley Business School - University of Reading

Anupam Nanda

University of Reading - School of Real Estate & Planning, Henley Business School

Date Written: August 26, 2014

Abstract

We evaluate a number of real estate sentiment indices to ascertain current and forward-looking information content that may be useful for forecasting demand and supply activities. Analyzing the dynamic relationships within a Vector Auto-Regression (VAR) framework and using the quarterly US data over 1988-2010, we test the efficacy of several sentiment measures by comparing them with other coincident economic indicators. Overall, our analysis suggests that the sentiment in real estate convey valuable information that can help predict changes in real estate returns. These findings have important implications for investment decisions, from consumers’ as well as institutional investors’ perspectives.

Keywords: Sentiment Index, Predictability, VAR, Impulse Response, Out-of-sample Forecast

JEL Classification: C53, C82, E37, R31

Suggested Citation

Marcato, Gianluca and Nanda, Anupam, Information Content and Forecasting Ability of Sentiment Indicators: Case of Real Estate Market (August 26, 2014). Journal of Real Estate Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2487104

Gianluca Marcato (Contact Author)

Henley Business School - University of Reading ( email )

Department of Real Estate & Planning
Reading, RG6 6UD
United Kingdom
+44 (0)118 3788178 (Phone)
+44 (0)118 3788172 (Fax)

Anupam Nanda

University of Reading - School of Real Estate & Planning, Henley Business School ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

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