Unit Roots and Structural Change: An Application to US House-Price Indices

Giorgio Canarella, Stephen Miller and Stephen Pollard ()
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Stephen Pollard: Department of Economics, California State University, Los Angeles

No 1004, Working Papers from University of Nevada, Las Vegas , Department of Economics

Abstract: This paper employs unit-root tests that allow for two endogenous breaks as suggested by Lumdaine and Papell (1997) and Lee and Strazicich (2003) to investigate the returns on the S&P/Case-Shiller Home Price Indices. The tests that assume structural stability provide no evidence against the unit-root hypothesis in all returns series. Conversely, the Lumdaine-Papell and Lee-Strazicich tests indicate that significant structural breaks exist. Only the Lee-Strazicich test, however, which incorporates structural changes under the null hypothesis, finds that the returns to houses exhibit trend stationarity with structural breaks, in most cases, rather than a random walk. Following Meen (1999), we also investigate the stationarity of the metropolitan house-price ratios. The findings of the Lumsdaine-Papell test provide no evidence against the unit-root hypothesis in all house-price ratio series. Conversely, the Lee-Strazicich test finds broken-trend stationarity of the metropolitan house-price ratios for Boston, Miami, and New York.

Keywords: House-price indexes; Time-series properties; “Ripple” effects. (search for similar items in EconPapers)
JEL-codes: C30 C50 G10 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2010-08
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (11)

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Working Paper: Unit Roots and Structural Change: An Application to US House-Price Indices (2010)
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