Vector-autoregressive models are used to decompose housing returns in 18 OECD countries into cash ?ow (rent) news and discount rate (return) news. Only for two countries - Germany and Ireland - do changing expectations of future rents play a dominating role in explaining housing return...

We investigate the predictive power of the rent-to-price ratio for future real estate returns and rent growth in 18 OECD countries over the period 1970 to 2011. First, we document that in most countries returns are signi?cantly predictable by the rent-price ratio. An increase (decrease) in the...

Based on Chen and Zhao's (2009) criticism of VAR based return decompositions, we explain in detail the various limitations and pitfalls involved in such decompositions. First, we show that Chen and Zhao's interpretation of their excess bond return decomposition is wrong: the residual component...