The Timeline Estimation of Bubbles: The Case of Real Estate

31 Pages Posted: 16 Apr 2019

See all articles by Frank J. Fabozzi

Frank J. Fabozzi

EDHEC Business School

Keli Xiao

College of Business, Stony Brook University

Date Written: Summer 2019

Abstract

We develop and then apply a new recursive regression methodology with a two‐direction searching process for initialization. The methodology improves the reliability of existing models when estimating a bubble's timeline. We apply our proposed methodology to estimate bubbles in U.S. home prices as well as in simulated scenarios. Our results confirm the improvement in reliability of the proposed methodology in obtaining consistent estimators with varying samples. Moreover, we verify the presence of bubbles in the U.S. aggregate data and seven of the eight cities in our study prior to the subprime crisis and find evidence of the bubble's reemergence since October 2013.

Suggested Citation

Fabozzi, Frank J. and Xiao, Keli, The Timeline Estimation of Bubbles: The Case of Real Estate (Summer 2019). Real Estate Economics, Vol. 47, Issue 2, pp. 564-594, 2019, Available at SSRN: https://ssrn.com/abstract=3372521 or http://dx.doi.org/10.1111/1540-6229.12246

Frank J. Fabozzi (Contact Author)

EDHEC Business School ( email )

France
215 598-8924 (Phone)

Keli Xiao

College of Business, Stony Brook University ( email )

306 Harriman Hall
Stony Brook, NY 11794
United States

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