On the Predictive Content of Leading Indicators: The Case of U.S. Real Estate Markets

Sotiris Tsolacos (), Chris Brooks and Ogonna Nneji ()
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Sotiris Tsolacos: University of Reading
Ogonna Nneji: University of Reading

Journal of Real Estate Research, 2014, vol. 36, issue 4, 541-574

Abstract: This paper employs a probit and a Markov switching model using information from the Conference Board Leading Indicator and other predictor variables to forecast the signs of future rental growth in four key U.S. commercial rent series. We find that both approaches have considerable power to predict changes in the direction of commercial rents up to two years ahead, exhibiting strong improvements over a naïve model, especially for the warehouse and apartment sectors. We find that while the Markov switching model appears to be more successful, it lags behind actual turnarounds in market outcomes whereas the probit is able to detect whether rental growth will be positive or negative several quarters ahead.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2014
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Working Paper: On the Predictive Content of Leading Indicators: The Case of US Real Estate Markets (2013)
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