Abstract:
The objective of this study is to provide a direct estimate of the degree of persistence of
measures of nominal and real house prices for the US economy, covering the longest possible
annual sample of data, namely 1830–2013. The estimation of the degree of persistence accommodates
for non-linear (deterministic) trends using Chebyshev polynomials in time. In general,
the results show a high degree of persistence in the series along with a component of non-linear
behaviour. In general, if we assume uncorrelated errors, non-linearities are observed in both
nominal and real prices, but this hypothesis is rejected in favour of linear models for the logtransformation
of the data. However, if autocorrelated errors are permitted, non-linearities are
observed in all cases, and mean reversion is found in the case of logged prices, though given the
wide confidence intervals, the unit root null hypothesis cannot be rejected in these cases.
