Does Temporal Aggregation Explain the Persistence of the S&P/Case‐Shiller Indices? Evidence from a Longitudinal Specification

Antoine Giannetti

Real Estate Economics, 2018, vol. 46, issue 3, 559-581

Abstract: Temporal aggregation is a repeat sale index construction methodology that consists of aggregating paired‐transactions in a moving‐average window. In particular, the methodology is used to calculate the popular S&P/Case‐Shiller home price indices. In this article, I focus the insights of the literature on measurement error to demonstrate that temporal aggregation produces idiosyncratic biases in predictive regression slopes. I further estimate a dynamic instrumental variable (IV) panel for the 20 S&P/Case‐Shiller metro areas. The main empirical finding is that temporal aggregation is a short‐lived statistical disturbance that does not explain the homogenous robust persistence of the indices.

Date: 2018
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https://doi.org/10.1111/1540-6229.12200

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