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Forecasting the oil price using house prices

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  • Schulz, Rainer
  • Wersing, Martin

Abstract

We show that house prices from Aberdeen in the UK improve in- and out-of-sample oil price forecasts. The improvements are of a similar magnitude to those attained using macroeconomic indicators. We explain these forecast improvements with the dominant role of the oil industry in Aberdeen. House prices aggregate the dispersed knowledge of the future oil price that exists in the city. We obtain similar empirical evidence for Houston, another city dominated by the oil industry. Consistent with our explanation, we find that house prices from economically more diversified areas in the UK and the US do not improve oil price forecasts.

Suggested Citation

  • Schulz, Rainer & Wersing, Martin, 2015. "Forecasting the oil price using house prices," SFB 649 Discussion Papers 2015-041, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2015-041
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    References listed on IDEAS

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    More about this item

    Keywords

    oil price forecasting; house prices; knowledge spillover;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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