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Please use this identifier to cite or link to this item: http://hdl.handle.net/10204/3803

Title: Could we have predicted the recent downturn in the South African housing market?
Authors: Das, S
Gupta, R
Kabundi, A
Keywords: Dynamic factor model
Forecast accuracy
Housing market
Housing economics
Bayesian vector autoregressive
Issue Date: 2009
Publisher: Elsevier
Citation: Das, S, Gupta, R and Kabundi, A. 2009. Could we have predicted the recent downturn in the South African housing market?. Journal of housing economics, Vol. 18(4), pp 325–335
Abstract: This paper develops large-scale Bayesian Vector Autoregressive (BVAR) models, based on 268 quarterly series, for forecasting annualized real house price growth rates for large-, medium- and small-middle-segment housing for the South African economy. Given the in-sample period of 1980:01–2000:04, the large-scale BVARs, estimated under alternative hyperparameter values specifying the priors, are used to forecast real house price growth rates over a 24-quarter out-of-sample horizon of 2001:01–2006:04. The forecast performance of the large-scale BVARs are then compared with classical and Bayesian versions of univariate and multivariate Vector Autoregressive (VAR) models, merely comprising of the real growth rates of the large-, medium- and small-middle-segment houses, and a large-scale Dynamic Factor Model (DFM), which comprises of the same 268 variables included in the large-scale BVARs. Based on the one- to four-quarters-ahead Root Mean Square Errors (RMSEs) over the out-of-sample horizon, we find the large-scale BVARs to not only outperform all the other alternative models, but to also predict the recent downturn in the real house price growth rates for the three categories of the middle-segmenthousing over the period of 2003:01–2008:02.
Description: Copyright: 2009 Elsevier. This is the pre print version of the work. It is posted here by permission of Elsevier for your personal use. Not for redistribution. The definitive version is published in the Journal of housing economics, Vol. 18(2009), pp 325-335
URI: http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6WJR-4W6Y81X-2&_user=958262&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_acct=C000049363&_version=1&_urlVersion=0&_userid=958262&md5=8a3e2ba8b97d10e1620478d6790d7e54
ISSN: 1051-1377
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