Long range dependency and forecasting of housing price index and mortgage market rate: evidence of subprime crisis

Abstract

Article history: Received January 20, 2015 Received in revised format 6 February 2015 Accepted 25 March 2015 Available online March 25 2015 In this paper, we examine and forecast the House Price Index (HPI) and mortgage market rate in terms of the description of the subprime crisis. We use a semi-parametric local polynomial Whittle estimator proposed by Shimotsu et al. (2005) [Shimotsu, K., & Phillips, P.C.B. (2005), Exact local Whittle estimation of fractional integration. The Annals of Statistics, 33(4), 18901933.] in a long memory parameter time series. Empirical investigation of HPI and mortgage market rate shows that these variables are more persistent when the d estimates are found on the Shimotsu method than on the one of Kunsch (1987) [Kunsch, H.R. (1987). Statistical aspects of self-similar processes. In Y. Prokhorov and V.V. Sazanov (eds.), Proceedings of the First World Congress of the Bernoulli Society, VNU Science Press, Utrecht, 67-74.]. The estimating forecast values are more realistic and they strongly reflect the present US economy actuality in the two series as indicated by the forecast evaluation topics. Growing Science Ltd. All rights reserved. 5 © 201