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Rationality and Momentum in Real Estate Investment Forecasts

Author

Listed:
  • Dimitrios Papastamos

    (Eurobank EFG Property Services S.A.)

  • Fotis Mouzakis

    (Frynon Consulting)

  • Simon Stevenson

    (School of Real Estate & Planning, Henley Business School, University of Reading)

Abstract

This study examines the rationality and momentum in forecasts for rental, capital value and total returns for the real estate investment market in the United Kingdom. In order to investigate if forecasters are affected by the general economic conditions present at the time of forecast we incorporate into the analysis Gross Domestic Product (GDP) and the Default Spread (DS). The empirical findings show high levels of momentum in the forecasts, with highly persistent forecast errors. The results also indicate that forecasters are affected by adverse conditions. This is consistent with the finding that they tend to exhibit greater forecast error when the property market is underperforming and vice-versa.

Suggested Citation

  • Dimitrios Papastamos & Fotis Mouzakis & Simon Stevenson, 2014. "Rationality and Momentum in Real Estate Investment Forecasts," Real Estate & Planning Working Papers rep-wp2014-07, Henley Business School, University of Reading.
    • Handle: RePEc:rdg:repxwp:rep-wp2014-07
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    File URL: http://centaur.reading.ac.uk/36851/1/wp0714.pdf
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    More about this item

    Keywords

    Property Forecasts; Forecast Errors; Momentum; Bias; Efficiency;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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