Forecasting US real house price returns over 1831–2013 : evidence from copula models
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Date
Authors
Gupta, Rangan
Majumdar, Anandamayee
Journal Title
Journal ISSN
Volume Title
Publisher
Routledge
Abstract
Given the existence of non-normality and nonlinearity in the data generating process of real
house price returns over the period of 1831-2013, this paper compares the ability of various
univariate copula models, relative to standard benchmarks (naive and autoregressive models) in
forecasting real US house price over the annual out-of-sample period of 1859-2013, based on an
in-sample of 1831-1873. Overall, our results provide overwhelming evidence in favor of the
copula models (Normal, Student’s t, Clayton, Frank, Gumbel, Joe and Ali-Mikhail-Huq) relative
to linear benchmarks, and especially for the Student’s t copula, which outperforms all other
models both in terms of in-sample and out-of-sample predictability results. Our results highlight
the importance of accounting for non-normality and nonlinearity in the data generating process
of real house price returns for the US economy for nearly two centuries of data.
Description
Keywords
House price, Copula models, Forecasting
Sustainable Development Goals
Citation
Rangan Gupta & Anandamayee Majumdar (2015) Forecasting US real house price returns over 1831–2013: evidence from copula models, Applied Economics, 47:48, 5204-5213, DOI:10.1080/00036846.2015.1044648.