Predicting Downturns in the US Housing Market: A Bayesian Approach
Rangan Gupta () and
Sonali Das ()
No 200821, Working Papers from University of Pretoria, Department of Economics
This paper estimates Bayesian Vector Autoregressive (BVAR) models, both spatial and non-spatial (univariate and multivariate), for the twenty largest states of the US economy, using quarterly data over the period 1976:Q1 to 1994:Q4; and then forecasts one-to-four quarters ahead real house price growth over the out-of-sample horizon of 1995:Q1 to 2006:Q4. The forecasts are then evaluated by comparing them with the ones generated from an unrestricted classical Vector Autoregressive (VAR) model and the corresponding univariate variant the same. Finally, the models that produce the minimum average Root Mean Square Errors (RMSEs), are used to predict the downturns in the real house price growth over the recent period of 2007:Q1 to 2008:Q1. The results show that the BVARs, in whatever form they might be, are the best performing models in 19 of the 20 states. Moreover, these models do a fair job in predicting the downturn in 18 of the 19 states, however, they always under-predict the size of the decline in the real house price growth rate – an indication of the need to incorporate the role of fundamentals in the models.
Keywords: BVAR Model; BVAR Forecasts; Forecast Accuracy; SBVAR Model; SBVAR Forecasts; VAR Model; VAR Forecasts (search for similar items in EconPapers)
JEL-codes: E17 E27 E37 E47 (search for similar items in EconPapers)
Pages: 21 pages
New Economics Papers: this item is included in nep-for, nep-geo, nep-mac and nep-ure
References: Add references at CitEc
Citations: Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Journal Article: Predicting Downturns in the US Housing Market: A Bayesian Approach (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:200821
Access Statistics for this paper
More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().