Abstract:
In this study, we examine the response of housing returns in China, India and Russia to different oil shocks, generated from a more accurate estimation approach. Given the available data for the relevant variables, the MIDAS approach which helps circumvent aggregation problem in the estimation process is employed. We also extend the MIDAS framework to account for nonlinearities in the model. Expectedly, the housing returns of the countries considered respond differently to the variants of oil shocks. More importantly, the result indicates that housing returns in Russia serve as a good hedge against oil price risk while housing returns in China and India do not. We also find that modeling with the MIDAS framework offers better predictability than other variants with uniform frequency.
