Dr. Heiner Mikosch - Seminar Presentation

Date and Time: December 26th, 2017, 10:00 - 11:30 am

Room: A 101 in the Economics Building (Museum)

Abstract

This paper examines crashes following price run-ups and rebounds following price declines in U.S. state-level housing markets over the past 40 years. We find that a sharp increase in house prices predicts a higher probability of a crash, and likewise a sharp decline in house prices predicts a higher probability of a rebound.

Local demand and supply factors can predict housing returns when the market is going up, while it is harder to use the same factors to predict returns when the market is going down. Such characteristics are robust to different thresholds of price movements. We also show that the predictability in housing returns produces trading strategies that have Sharpe ratios comparable to those in stock markets.

 

About the Speaker

Dr. Xiaojun Sun is assistant professor in the Department of Economics and Finance at the University of Texas at El Paso. He obtained his Ph.D. from Virginia Tech in 2015. His research interests are empirical macroeconomics and applied econometrics.