Testing Long Memory in the Presence of Structural Breaks: An Application to Regional and National Housing Markets

Posted: 9 Apr 2015

See all articles by Geoffrey Ngene

Geoffrey Ngene

Mercer University - Eugene W. Stetson School of Business and Economics

Charles Lambert

Independent

Ali F. Darrat

Louisiana Tech University - College of Business

Date Written: April 7, 2015

Abstract

We use parametric and semi-parametric methods to explore the effects of structural breaks on long memory processes in nine US regional and national housing prices over the period from January 1991 to February 2014. The results reveal multiple structural breaks and differential break points across regions. The regional break points do not coincide with the national break suggesting a spatial pattern of the underlying determinants of regional housing prices. We find long memory in regional housing prices using the entire sample period, but the results are generally reversed in sub-samples (regimes) the incorporate structural breaks. Our evidence suggests that failure to account for structural breaks when testing for long memory can lead to incorrect inferences. The results, which proved robust to model specifications, have important implications for policy prescriptions, for market efficiency, and for the integration of regional housing markets.

Keywords: Long memory; Structural breaks; Regional housing prices; Regimes

JEL Classification: C32, C33, E32, R11

Suggested Citation

Ngene, Geoffrey and Lambert, Charles and Darrat, Ali F., Testing Long Memory in the Presence of Structural Breaks: An Application to Regional and National Housing Markets (April 7, 2015). Journal of Real Estate Finance and Economics, Vol. 50, No. 4, 2015, Available at SSRN: https://ssrn.com/abstract=2591480

Geoffrey Ngene (Contact Author)

Mercer University - Eugene W. Stetson School of Business and Economics ( email )

1400 Coleman Av
Macon, GA 31207
United States

Charles Lambert

Independent ( email )

Ali F. Darrat

Louisiana Tech University - College of Business ( email )

Department of Economics & Finance
P.O. Box 10318
Ruston, LA 71272
United States
318-257-3874 (Phone)
318-257-4253 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
342
PlumX Metrics