Evaluating Alternative Methods of Forecasting House Prices: A Post-Crisis Reassessment

William Larson

No 2010-004, Working Papers from The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting

Abstract: This paper compares the performance of different forecasting models of California house prices. Multivariate, theory-driven models are able to outperform a theoretical time series models across a battery of forecast comparison measures. Error correction models were best able to predict the turning point in the housing market, whereas univariate models were not. Similarly, even after the turning point occurred, error correction models were still able to outperform univariate models based on MSFE, bias, and forecast encompassing statistics and tests. These results highlight the importance of incorporating theoretical economic relationships into empirical forecasting models.

Keywords: house prices; forecasting; forecast comparison; forecast encompassing (search for similar items in EconPapers)
JEL-codes: C52 C53 E37 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2010-12, Revised 2011-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:gwc:wpaper:2010-004

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