Size and sign asymmetries in house price adjustments

Kurmaş Akdoğan

Applied Economics, 2019, vol. 51, issue 48, 5268-5281

Abstract: Long-run mean-reversion in real house prices is determined by the relative strength of fundamental factors against the short-run influences. This article suggests that the adjustment towards the long-run trend in house prices could display non-linear behaviour due to some intrinsic characteristics of the housing market. Accordingly, sign and size asymmetries as well as possible structural breaks are taken into account in a unit root testing exercise for twenty-nine countries. Our results suggest that mean-reversion exists for seventy percent of the countries in our sample. Moreover, the out-of-sample forecasting performance of our non-linear models in predicting house prices is better than a simple auto-regressive benchmark for some countries.

Date: 2019
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DOI: 10.1080/00036846.2019.1612030

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