Modelling Returns in US Housing Prices-You're the One for Me, Fat Tails

• In this paper, we analysed the heavy-tailed behaviour in the dynamics of housing-price returns in the United States. We investigated the sources of heavy tails by estimating autoregressive models in which innovations can be subject to GARCH effects and/or non-Gaussianity. Using monthly data from January 1954 to September 2019, the properties of the models were assessed both within- and out-of-sample. We found strong evidence in favour of modelling both GARCH effects and non-Gaussianity. Accounting for these properties improves within-sample performance as well as point and density forecasts.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

non-Gaussianity

GARCH

probability integral transform

Kullback-Leibler information criterion

Publication and Content Type

ref (subject category)

art (subject category)