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High-Frequency Volatility Forecasting of US Housing Markets

Author

Listed:
  • Mawuli Segnon

    (University of Münster)

  • Rangan Gupta

    (University of Pretoria)

  • Keagile Lesame

    (University of Pretoria)

  • Mark E. Wohar

    (University of Nebraska at Omaha)

Abstract

We propose a logistic smooth transition autoregressive fractionally integrated [STARFI (p, d)] process for modeling and forecasting US housing price volatility. We discuss the statistical properties of the model and investigate its forecasting performance by assuming various specifications for the dynamics underlying the variance process in the model. Using a unique database of daily data on price indices from ten major US cities, and the corresponding daily Composite 10 Housing Price Index, and also a housing futures price index, we find that using the Markov-switching multifractal (MSM) and FIGARCH frameworks for modeling the variance process helps improving the gains in forecast accuracy.

Suggested Citation

  • Mawuli Segnon & Rangan Gupta & Keagile Lesame & Mark E. Wohar, 2021. "High-Frequency Volatility Forecasting of US Housing Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 62(2), pages 283-317, February.
    • Handle: RePEc:kap:jrefec:v:62:y:2021:i:2:d:10.1007_s11146-020-09745-w
    DOI: 10.1007/s11146-020-09745-w
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    Cited by:

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    2. Bonato, Matteo & Çepni, Oğuzhan & Gupta, Rangan & Pierdzioch, Christian, 2021. "Do oil-price shocks predict the realized variance of U.S. REITs?," Energy Economics, Elsevier, vol. 104(C).
    3. Jiqian Wang & Rangan Gupta & Oğuzhan Çepni & Feng Ma, 2023. "Forecasting international REITs volatility: the role of oil-price uncertainty," The European Journal of Finance, Taylor & Francis Journals, vol. 29(14), pages 1579-1597, September.
    4. Goodness C. Aye & Christina Christou & Rangan Gupta & Christis Hassapis, 2024. "High-Frequency Contagion between Aggregate and Regional Housing Markets of the United States with Financial Assets: Evidence from Multichannel Tests," The Journal of Real Estate Finance and Economics, Springer, vol. 69(2), pages 253-276, August.
    5. Rangan Gupta & Damien Moodley, 2023. "Housing Search Activity and Quantiles-Based Predictability of Housing Price Movements in the United States," Working Papers 202335, University of Pretoria, Department of Economics.
    6. Matteo Bonato & Oguzhan Cepni & Rangan Gupta & Christian Pierdzioch, 2022. "Forecasting realized volatility of international REITs: The role of realized skewness and realized kurtosis," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(2), pages 303-315, March.

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    More about this item

    Keywords

    US housing prices; GARCH processes; MSM processes; Model confidence set;
    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
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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