Modeling Volatility in California Real Estate Prices

Prakash L Dheeriya

Icfai University Journal of Applied Economics, 2009, vol. VIII, issue 1, pages 26-38

Abstract: Generalized Autoregressive Conditional Heteroskedasticity (GARCH) effects have been studied extensively in portfolio management within risk-return framework. Very few studies, however, have applied principles underlying GARCH processes to house prices and fewer have undertaken studies at the local level. Earlier GARCH studies in housing markets have focused on aggregate effects across markets or taken a macro-oriented approach. This paper estimates and develops GARCH models for each major county in California, allowing for different effects in each. Unlike previous GARCH studies, this paper employs dollar denominated house prices instead of indices to measure returns. The results indicate that there are GARCH effects in four counties in Northern California and at the state level.

Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:icf:icfjae:v:08:y:2008:i:1:p:26-38

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