This chapter reviews the evidence of predictability in US residential and commercial real estate markets. First, we highlight the main methodologies used in the construction of real estate indices, their underlying assumptions and their impact on the stochastic properties of the resultant...

The firm's inventory-sales ratio prices exposure to the housing cycle with a predictable sign. The buyer of a new home holds a pre-construction contract at a guaranteed price with the right to cancel at any date up to delivery. The demand for contracts rises with falling user costs while lot...

This paper aims at providing both a conceptual and practical framework for assessing real estate risk factors as a way of predicting real estate yields. Real estate returns - as those of any financial asset - are linked to their risk. However, real estate risk is much more difficult to measure...

Previous research finds that the cap rate, that is, the income-price ratio of commercial real estate, predicts future investment returns. This finding's implication on the efficiency of the real estate market crucially depends on whether the cap rate also predicts future risk. Using accurately...

The firm’s inventory-sales ratio prices exposure to the housing cycle with a predictable sign. The buyer of a new home holds a pre-construction contract at a guaranteed price with the right to cancel at any date up to delivery. The demand for contracts rises with falling user costs while lot...

Over the first two decades of the 21st century, there has been a high correlation betweenbalance of payment measures and housing price indexes. The international finance theory hasfocused on determining the cause of this relationship. The theory has found that deregulationin credit markets,...

Common approaches to test for the economic value of directional forecasts are based on the classical Chi-square test for independence, Fisher’s exact test or the Pesaran and Timmerman (1992) test for market timing. These tests are asymptotically valid for serially independent observations....

This paper proposes a novel approach to the combination of conditional covariance matrix forecasts based on the use of the Generalized Method of Moments (GMM). It is shown how the procedure can be generalized to deal with large dimensional systems by means of a two-step strategy. The finite...

We propose a new approach to model high and low frequency components of equity correlations. Our framework combines a factor asset pricing structure with other specifications capturing dynamic properties of volatilities and covariances between a single common factor and idiosyncratic returns....