In this paper long-run forecasting of multicointegrating variables is investigated. Multicointegration typically occurs in dynamic systems involving both stock and flow variables whereby a common feature in the form of shared stochastic trends is present across different levels of multiple time...

We analyze and compare the properties of various methods for bias-correcting parameter estimates in vector autoregressions. First, we show that two analytical bias formulas from the existing literature are in fact identical. Next, based on a detailed simulation study, we show that this simple...

Vector-autoregressive models are used to decompose housing returns in 18 OECD countries into cash ?ow (rent) news and discount rate (return) news. Only for two countries - Germany and Ireland - do changing expectations of future rents play a dominating role in explaining housing return...

We document that over the period 1953-2011 US bond returns are predictable in expansionary periods but unpredictable during recessions. This result holds in both in-sample and out-of-sample analyses and using both univariate regressions and combination forecasting techniques. A simulation study...

We investigate the predictive power of the rent-to-price ratio for future real estate returns and rent growth in 18 OECD countries over the period 1970 to 2011. First, we document that in most countries returns are signi?cantly predictable by the rent-price ratio. An increase (decrease) in the...

We conduct an econometric analysis of bubbles in housing markets in the OECD area, using quarterly OECD data for 18 countries from 1970 to 2013. We pay special attention to the explosive nature of bubbles and use econometric methods that explicitly allow for explosiveness. First, we apply the...

By using a beginning-of-period timing convention for consumption, and by including the Great Depression years in the analysis, we show that on annual data from 1926 to 2009 a standard contemporaneous consumption risk model goes a long way in explaining the size and value premiums in...

Eugene Fama has repeatedly expressed his discontent with the notion of an irrational bubble. However, he has never publicly expressed his opinion on rational bubbles. This is peculiar since such bubbles build naturally from the rational efficient markets paradigm that Fama strongly adheres to....

Based on Chen and Zhao's (2009) criticism of VAR based return decompositions, we explain in detail the various limitations and pitfalls involved in such decompositions. First, we show that Chen and Zhao's interpretation of their excess bond return decomposition is wrong: the residual component...

I comment on the controversy between McCloskey & Ziliak and Hoover & Siegler on statistical versus economic significance, in the March 2008 issue of the Journal of Economic Methodology. I argue that while McCloskey & Ziliak are right in emphasizing ’real error’, i.e. non-sampling error that...