Unit Roots and Structural Change: An Application to US House-Price Indices
Stephen Miller () and
Stephen K. Pollard
Additional contact information
Stephen K. Pollard: California State University, Los Angeles
No 2010-04, Working papers from University of Connecticut, Department of Economics
This paper addresses two issues. First, we employ unit-root tests that allow for two endogenous breaks as suggested by Lumdaine and Papell (1997) and, more recently, Lee and Strazicich (2003) to investigate the integration properties of the returns on the S&P/Case-Shiller Home Price Indices. The findings of the tests that assume structural stability provide no evidence against the unit-root hypothesis in all returns series. Conversely, the Lumdaine-Papell and Lee-Strazicich tests indicate that significant structural breaks exist in the US housing market. Only the Lee-Strazicich test, however, which incorporates structural changes under the null hypothesis, finds that the returns to houses exhibit trend stationarity with structural breaks, in most cases, rather than a random walk. Second, we apply these tests to analyze what UK researchers call the "ripple effect" in the British housing markets. Following Meen (1999), we investigate the stationarity of the metropolitan house-price ratios. The findings of the Lumsdaine-Papell test provide no evidence against the unit-root hypothesis in all house-price ratio series. Conversely, the Lee-Strazicich test finds broken-trend stationarity of the metropolitan house-price ratios for Boston, Miami, and New York. This provides limited evidence that some ripple effects do indeed exists in the US housing market.
Keywords: House-price indexes; Time-series properties; "Ripple" effects (search for similar items in EconPapers)
JEL-codes: G10 C30 C50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2010-02, Revised 2010-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed
Downloads: (external link)
https://media.economics.uconn.edu/working/2010-04r.pdf Full text (revised version) (application/pdf)
https://media.economics.uconn.edu/working/2010-04.pdf Full text (original version) (application/pdf)
Working Paper: Unit Roots and Structural Change: An Application to US House-Price Indices (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:uct:uconnp:2010-04
Access Statistics for this paper
More papers in Working papers from University of Connecticut, Department of Economics University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063. Contact information at EDIRC.
Bibliographic data for series maintained by Mark McConnel ().