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Backcasting, Nowcasting, and Forecasting Residential Repeat-Sales Returns: Big Data meets Mixed Frequency

Author

Listed:
  • Matteo Garzoli

    (University of Lugano)

  • Alberto Plazzi

    (Swiss Finance Institute; Universita' della Svizzera italiana)

  • Rossen I. Valkanov

    (University of California, San Diego (UCSD) - Rady School of Management)

Abstract

The Case-Shiller is the reference repeat-sales index for the U.S. residential real estate market, yet it is released with a two-month delay. We find that incorporating recent information from 71 financial and macro predictors improves backcasts, now-casts, and short-term forecasts of the index returns. Combining individual forecasts with recently-proposed weighting schemes delivers large improvements in forecast accuracy at all horizons. Additional gains obtain with mixed-data sampling methods that exploit the daily frequency of financial variables, reducing the mean square forecast error by as much as 13% compared to a simple autoregressive benchmark. The forecast improvements are largest during economic turmoils, throughout the 2020 COVID-19 pandemic period, and in more populous metropolitan areas.

Suggested Citation

  • Matteo Garzoli & Alberto Plazzi & Rossen I. Valkanov, 2021. "Backcasting, Nowcasting, and Forecasting Residential Repeat-Sales Returns: Big Data meets Mixed Frequency," Swiss Finance Institute Research Paper Series 21-21, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2121
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    More about this item

    Keywords

    Real estate; Case-Shiller; MIDAS; Forecasting; Big Data;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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