Willcocks, G., 2009. UK Housing Market: Time Series Processes with Independent and Identically Distributed Residuals. The Journal of Real Estate Finance and Economics, 39 (4), pp. 403-414.
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Official URL: http://dx.doi.org/10.1007/s11146-008-9117-3
The paper examines whether a univariate data generating process can be identified which explains the data by having residuals that are independent and identically distributed, as verified by the BDS test. The stationary first differenced natural log quarterly house price index is regressed, initially with a constant variance and then with a conditional variance. The only regression function that produces independent and identically distributed standardised residuals is a mean process based on a pure random walk format with Exponential GARCH in mean for the conditional variance. There is an indication of an asymmetric volatility feedback effect but higher frequency data is required to confirm this. There could be scope for forecasting the index but this is tempered by the reduction in the power of the BDS test if there is a non-linear conditional variance process.
|Uncontrolled Keywords:||UK house prices - Independent and identically distributed residuals - iid|
|Subjects:||Social Sciences > Finance and Financial Economics|
|Group:||Business School > Centre for Finance and Risk|
|Deposited By:||INVALID USER|
|Deposited On:||29 Jan 2009 18:03|
|Last Modified:||07 Mar 2013 15:06|
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