Testing for predictive power of price/rent ratio for determining house prices in OECD countries
Master thesis

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Date
2018Metadata
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- Master of Science [1822]
Abstract
We study the predictability of price and rent changes by rent-to-price ratio
for 20 OECD countries over the period 1970 to 2017. To investigate the
relationship we used Vector Error-Correction Model (VECM) and long-horizon
model. We constructed bootstrapping procedures to address the issues of biased
estimates from the long-horizon model. First, we found that for most countries
prices do all the correcting over the long-run time range. Second, there are
significant cross-country differences in how rent-to-price ratio defines future rent
growth. Third, both models showed completely different results. We concluded
that rent-to-price ratio is not a complete predictor of price and rents formations on
these markets.
Description
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2018