Information Content and Forecasting Ability of Sentiment Indicators: Case of Real Estate Market

摘要

We evaluate a number of real estate sentiment indices to ascertain current and forward-looking information content that may be useful for forecasting demand and supply activities. Analyzing the dynamic relationships within a vector autoregression (VAR) framework and using quarterly U.S. data over 1988-2010, we test the efficacy of several sentiment measures by comparing them with other coincident economic indicators. Overall, our analysis suggests that the sentiment in real estate conveys valuable information that can help predict changes in real estate returns. These findings have important implications for investment decisions, from consumers' as well as institutional investors' perspectives.