Forecasting US Real House Price Returns over 1831-2013: Evidence from Copula Models
Rangan Gupta () and
No 201444, Working Papers from University of Pretoria, Department of Economics
Given the existence of non-normality and nonlinearity in the data generating process of real house price returns over the period of 1831-2013, this paper compares the ability of various univariate copula models, relative to standard benchmarks (naive and autoregressive models) in forecasting real US house price over the annual out-of-sample period of 1859-2013, based on an in-sample of 1831-1858. Overall, our results provide overwhelming evidence in favor of the copula models (Normal, Student’s t, Clayton, Frank, Gumbel, Joe and Ali-Mikhail-Huq) relative to linear benchmarks, and especially for the Student’s t copula, which outperforms all other models both in terms of in-sample and out-of-sample predictability results. Our results highlight the importance of accounting for non-normality and nonlinearity in the data generating process of real house price returns for the US economy for nearly two centuries of data.
Keywords: House Price; Copula Models; Forecasting (search for similar items in EconPapers)
JEL-codes: C22 C53 R3 (search for similar items in EconPapers)
Pages: 16 pages
New Economics Papers: this item is included in nep-ets, nep-for and nep-ure
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Journal Article: Forecasting US real house price returns over 1831-2013: evidence from copula models (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201444
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