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Uncertainty and predictability of real housing returns in the United Kingdom: A regional analysis
Author(s) -
Salisu Afees A.,
Gupta Rangan,
Ogbonna Ahamuefula E.,
Wohar Mark E.
Publication year - 2022
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/for.2878
Subject(s) - predictability , benchmark (surveying) , econometrics , economics , financial crisis , sample (material) , measure (data warehouse) , geography , macroeconomics , statistics , computer science , cartography , mathematics , chemistry , chromatography , database
The predictability of uncertainty for real housing returns in the United Kingdom is examined using regional data covering 12 regions, namely, East Midlands, East of England, London, North East, North West, Northern Ireland, Scotland, South East, South West, Wales, West Midlands, and Yorkshire and the Humber. We utilize both housing price uncertainty (HPU) and economic policy uncertainty (EPU) data while we render analyses for three data samples—full sample and two subsamples covering the periods before and after the emergence of global financial crisis (GFC). Relying on a predictive model that accounts for the salient characteristics of the data, we find a negative relationship between HPU and real housing returns, on the average, regardless of the region analyzed. Also, the model that accounts for HPU outperforms the benchmark model that ignores it while controlling for relevant covariates further improves the forecast performance. Additional analyses involving the EPU measure depict lower predictive contents for house price movements relative to the HPU measure and therefore using sector‐specific uncertainty measure is crucial for more precise forecasts of real housing returns.