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Sequential Monitoring of Changes in Housing Prices

  • KanKan
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Document pages: 47 pages

Abstract: We propose a sequential monitoring scheme to find structural breaks in realestate markets. The changes in the real estate prices are modeled by acombination of linear and autoregressive terms. The monitoring scheme is basedon a detector and a suitably chosen boundary function. If the detector crossesthe boundary function, a structural break is detected. We provide theasymptotics for the procedure under the stability null hypothesis and thestopping time under the change point alternative. Monte Carlo simulation isused to show the size and the power of our method under several conditions. Westudy the real estate markets in Boston, Los Angeles and at the national U.S.level. We find structural breaks in the markets, and we segment the data intostationary segments. It is observed that the autoregressive parameter isincreasing but stays below 1.

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