Real estate indices based on appraisals or sale prices of properties are known for their slow response to market news. These indices can therefore be represented (in logarithm) as the sum of a latent "true" price index and a lagging error. We show that the latent appreciation return and the...

This paper develops a methodology to identify asset price response to news in the framework of the Campbell-Shiller log-linear present-value equation. We further show that a slow price adjustment in real estate markets not only induces a high serial autocorrelation in excess returns, but also...