Economic policy uncertainty, U.S. real housing returns and their volatility: A nonparametric approach

Christophe André, Lumengo Bonga-Bonga, Rangan Gupta, John W. Muteba Mwamba

Research output: Contribution to journalArticlepeer-review

34 Citations (Scopus)


We analyze whether a news-based measure of economic policy uncertainty (EPU) helps predict movements in real housing returns. We find evidence of structural breaks and nonlinearity in the relation between real housing returns and EPU. We find that EPU affects both real housing returns and their volatility. This result still holds when controlling for macroeconomic and financial determinants of housing prices, suggesting that EPU has a direct impact on the housing market and not only an indirect effect through its influence on the wider economy and financial markets. Large uncertainty shocks generate disproportionate falls in housing returns, implying significant tail risks for investors in property or related securities in periods of high uncertainty. In addition, we find that taking EPU into account improves forecasts of both the level and volatility of real housing returns, in-sample as well as out-of-sample. Hence, information on EPU is useful, not only for predicting future returns on housing-related investments, but also for assessing related risks.

Original languageEnglish
Pages (from-to)493-514
Number of pages22
JournalJournal of Real Estate Research
Issue number4
Publication statusPublished - 2017

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Finance
  • Urban Studies
  • Economics, Econometrics and Finance (miscellaneous)


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