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Dynamic asymmetries in house price cycles: A generalized smooth transition model

Alessandra Canepa () and Emilio Zanetti Chini ()

Journal of Empirical Finance, 2016, vol. 37, issue C, 91-103

Abstract: In this paper we propose a novel nonlinear model to capture asymmetries in real estate cycles. The approach involves a particular parametrization of the transition function used in the transition equation of a smooth transition autoregressive model which improves the fit in the non-central probability region. The dynamic symmetry in house price cycles is strongly rejected for the housing markets taken into consideration. Further, our results show that the proposed model performs well in a out of sample forecasting exercise.

Keywords: House price cycles; Dynamic asymmetries; Non-linear models; Forecasting (search for similar items in EconPapers)
JEL-codes: C10 C31 C33 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1016/j.jempfin.2016.02.011

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Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

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