Nº 21-21: Backcasting, Nowcasting, and Forecasting Residential Repeat-Sales Returns: Forecast Combination meets Mixed Frequency

AuthorM. Garzoli, A. Plazzi, R. I. Valkanov
Date2 mars 2021
CatégorieWorking Papers

The Case-Shiller is the reference repeat-sales index for the U.S. residential real estate market, yet it is released with a two-month delay. We find that incorporating recent information from 71 financial and macro predictors improves backcasts, now-casts, and short-term forecasts of the index returns. Combining individual forecasts with recently-proposed weighting schemes delivers large improvements in forecast accuracy at all horizons. Additional gains obtain with mixed-data sampling methods that exploit the daily frequency of financial variables, reducing the mean square forecast error by as much as 13% compared to a simple autoregressive benchmark. The forecast improvements are largest during economic turmoils, throughout the 2020 COVID-19 pandemic period, and in more populous metropolitan areas.

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