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The Impact of Economic Policy Uncertainty on US Real Housing Returns and their Volatility: A Nonparametric Approach

Author

Listed:
  • Christophe André

    (Economics Department, Organisation for Economic Co-operation and Development (OECD), 75775 Paris, Cedex 16, France)

  • Lumengo Bonga-Bonga

    (Faculty of Economic and Financial Sciences, University of Johannesburg, P.O. Box 524, Auckland Park 2006, South Africa)

  • Rangan Gupta

    (Department of Economics, University of Pretoria)

  • John W. Muteba Mwamba

    (Faculty of Economic and Financial Sciences, University of Johannesburg, P.O. Box 524, Auckland Park 2006, South Africa)

Abstract

This paper analyzes whether a news-based measure of economic policy uncertainty (EPU) helps predict movements in real housing returns. We find evidence of structural breaks and nonlinearity in the relationship between real housing returns and EPU. Hence, we employ a k-th order non-parametric Granger causality test, which is robust to such features. We find strong evidence that economic policy uncertainty affects both real housing returns and their volatility. This suggests that investors in property or related securities can gain information from EPU, not only for predicting future returns, but also in assessing related risks.

Suggested Citation

  • Christophe André & Lumengo Bonga-Bonga & Rangan Gupta & John W. Muteba Mwamba, 2015. "The Impact of Economic Policy Uncertainty on US Real Housing Returns and their Volatility: A Nonparametric Approach," Working Papers 201582, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201582
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    Cited by:

    1. Andrew Adewale Alola, 2021. "Evidence of speculative bubbles and regime switch in real estate market and crude oil price: Insight from Saudi Arabia," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3473-3483, July.

    More about this item

    Keywords

    Economic policy uncertainty; real housing returns; volatility; non-parametric causality;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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