Rationality and Momentum in Real Estate Investment Forecasts

This study examines the rationality and momentum in rental and capital value forecasts of commercial real estate investment market in the United Kingdom. The adopted approach employs three dimensional panel data methods, by attributing the time series dimension to the sequential re-issues by a forecaster of a certain target forecast. The empirical method allows a multiplicity of assumptions regarding the covered by the data target time periods, forecast horizons, forecasters or groups of those to be examined with simultaneous use of the overall panel of data, without the need of segmenting the data set. The investigation includes macro-economic attribution factors to the temporary levels of forecast accuracy, such as Gross Domestic Product and the Default Spread. The empirical findings demonstrate that forecasters tend to maintain their biases over subsequent issues of the same target forecast, regardless of the lowering forecasting horizon. The results also indicate that forecasting accuracy is positively correlated with macro-economic conditions at the time of prediction.