Forecasting Eurozone real-estate returns

We use a real-time forecasting approach to study the predictability of excess returns on a benchmark Euro Area real-estate index. The real-time forecasting approach accounts for the fact that, in real time, an investor forecasts returns under conditions of model instability and model uncertainty. Our results show that excess returns are predictable out-of-sample using information on financial and macroeconomic data available to an investor in real time. We also study the real-time market-timing ability of an investor and the performance of a simple trading rule as compared to a buy-and-hold strategy.