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21 – 30 of over 49000Treshani Perera, David Higgins and Woon-Weng Wong
Property market models have the overriding aim of predicting reasonable estimates of key dependent variables (demand, supply, rent, yield, vacancy and net absorption rate). These…
Abstract
Purpose
Property market models have the overriding aim of predicting reasonable estimates of key dependent variables (demand, supply, rent, yield, vacancy and net absorption rate). These can be based on independent drivers of core property and economic activities. Accurate predictions can only be conducted when ample quantitative data are available with fewer uncertainties. However, a broad-fronted social, technical and ecological evolution can throw up sudden, unexpected shocks that result in the econometric outputs sceptical to unknown risk factors. Therefore, the purpose of this paper is to evaluate Australian office market forecast accuracy and to determine whether the forecasts capture extreme downside risk events.
Design/methodology/approach
This study follows a quantitative research approach, using secondary data analysis to test the accuracy of economists’ forecasts. The forecast accuracy evaluation encompasses the measurement of economic and property forecasts under the following phases: testing for the forecast accuracy; analysing outliers of forecast errors; and testing of causal relationships. Forecast accuracy measurement incorporates scale independent metrics that include Theil’s U values (U1 and U2) and mean absolute scaled error. Inter-quartile range rule is used for the outlier analysis. To find the causal relationships among variables, the time series regression methodology is utilised, including multiple regression analysis and Granger causality developed under the vector auto regression (VAR).
Findings
The credibility of economic and property forecasts was questionable around the period of the Global Financial Crisis (GFC); a significant man-made Black Swan event. The forecast accuracy measurement highlighted rental movement and net absorption forecast errors as the critical inaccurate predictions. These key property variables are explained by historic information and independent economic variables. However, these do not explain the changes when error time series of the variables were concerned. According to VAR estimates, all property variables have a significant causality derived from the lagged values of Australian S&P/ASX 200 (ASX) forecast errors. Therefore, lagged ASX forecast errors could be used as a warning signal to adjust property forecasts.
Research limitations/implications
Secondary data were obtained from the premier Australian property markets: Canberra, Sydney, Brisbane, Adelaide, Melbourne and Perth. A limited ten-year timeframe (2001-2011) was used in the ex-post analysis for the comparison of economic and property variables. Forecasts ceased from 2011, due to the discontinuity of the Australian Financial Review quarterly survey of economists; the main source of economic forecast data.
Practical implications
The research strongly recommended naïve forecasts for the property variables, as an input determinant in each office market forecast equation. Further, lagged forecast errors in the ASX could be used as a warning signal for the successive property forecast errors. Hence, data adjustments can be made to ensure the accuracy of the Australian office market forecasts.
Originality/value
The paper highlights the critical inaccuracy of the Australian office market forecasts around the GFC. In an environment of increasing incidence of unknown events, these types of risk events should not be dismissed as statistical outliers in real estate modelling. As a proactive strategy to improve office market forecasts, lagged ASX forecast errors could be used as a warning signal. This causality was mirrored in rental movements and total vacancy forecast errors. The close interdependency between rents and vacancy rates in the forecasting process and the volatility in rental cash flows reflects on direct property investment and subsequently on the ASX, is therefore justified.
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Chaido Dritsaki and Melina Dritsaki
The term “economic growth” refers to the increase of real gross national product or gross domestic product or per capita income. National income or else national product is…
Abstract
The term “economic growth” refers to the increase of real gross national product or gross domestic product or per capita income. National income or else national product is usually expressed as a measure of total added value of a domestic economy known as gross domestic product (GDP). Generally, GDP measures the value of economic activity within a country during a specific time period. The current study aims to find the most suitable model that adjusts on a time-series data set using Box-Jenkins methodology and to examine the forecasting ability of this model. The analysis used quarterly data for Greece from the first quarter of 1995 until the third quarter of 2019. Nonlinear maximum likelihood estimation (maximum likelihood-ML) was applied to estimate the model using the Broyden-Fletcher-Goldfarb-Shanno (BFGS) algorithm while covariance matrix was estimated using the negative of the matrix of log-likelihood second derivatives (Hessian-observed). Forecasting of the time series was achieved both with dynamic as well as static procedures using all forecasting criteria.
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Anthony Mills, David Harris and Martin Skitmore
Forecasting is an integral part of all business planning, and forecasting the outlook for housing is of interest to many firms in the housing construction sector. This research…
Abstract
Forecasting is an integral part of all business planning, and forecasting the outlook for housing is of interest to many firms in the housing construction sector. This research measures the performance of a number of industry forecasting bodies; this is done to provide users with an indicator of the value of housing forecasting undertaken in Australia. The accuracy of housing commencement forecasts of three Australian organisations – the Housing Industry Association (HIA), the Indicative Planning Council for the Housing Industry (IPC) and BIS‐Shrapnel – is examined through the empirical analysis of their published forecasts supplemented by qualitative data in the form of opinions elicited from several industry “experts” employed in these organisations. Forecasting performance was determined by comparing the housing commencement forecast with the actual data collected by the Australian Bureau of Statistics on an ex‐post basis. Although the forecasts cover different time periods, the level of accuracy is similar, at around 11‐13 per cent for four‐quarter‐ahead forecasts. In addition, national forecasts are more accurate than forecasts for individual states. This is the first research that has investigated the accuracy of both private and public sector forecasting of housing construction in Australia. This allows users of the information to better understand the performance of various forecasting organisations.
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This study aims to address the issue of prediction of inflation differences for an economy that considers either fixing its exchange rate or joining a currency union. In this…
Abstract
Purpose
This study aims to address the issue of prediction of inflation differences for an economy that considers either fixing its exchange rate or joining a currency union. In this setting, individual countries have limited control over their inflation, and anticipating the possible course of domestic inflation relative to inflation abroad becomes an important input in policy-making. In this context, the author compares simple forecast heuristics and econometric modeling.
Design/methodology/approach
The study compares two basically different approaches. The first approach of forecasting consists of simple heuristics. Various heuristics are considered that differ with respect to the economic reasoning that goes into quantifying the forecast rules. The simplest such forecasting heuristic suggests that the average over all available observations of inflation differentials should be taken as a predictor for the future. Bringing more economic insight to bear suggests a further heuristic according to which historical inflation differentials should be adjusted for changes in the nominal exchange rate. A further variant of this approach suggests that a forecast should exclusively rely on data from earlier times under a pegged exchange rate. A fundamentally different approach to prediction builds on dynamic econometric models estimated by using all available historical data independent of the currency regime.
Findings
The author studies three small member countries of the Eurozone, i.e. Finland, Luxembourg and Portugal. For the evaluation of the various forecasting strategies, he performs out-of-sample predictions over a horizon of five years. The comparison of the four different forecasting strategies documents that the variant of the forecast heuristic that draws on data from earlier experiences under fixed exchange rates performs better than the forecast based on the estimated econometric model.
Practical implications
The findings of this study provide helpful guidelines for countries considering either joining a currency union or fixing their exchange rate. The author shows that a simple forecasting heuristic gives sound advice for assessing the likely course of inflation.
Originality/value
This study describes how economic theory can guide the selection of historical data for assessing likely future developments. The analysis shows that using a simple heuristic based on historical analogy can lead to better forecasts than the analytically more sophisticated approach of econometric modeling.
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It is widely believed that the construction industry is more volatile than other sectors of the economy. Accurate predictions of the level of aggregate demand for construction are…
Abstract
It is widely believed that the construction industry is more volatile than other sectors of the economy. Accurate predictions of the level of aggregate demand for construction are of vital importance to all sectors of this industry (e.g. developers, builders and consultants). Empirical studies have shown that accuracy performance varies according to the type of forecasting technique and the variable to be forecast. Hence, there is a need to gain useful insights into how different techniques perform, in terms of accuracy, in the prediction of demand for construction. In Singapore, the residential sector has often been regarded as one of the most important owing to its large percentage share in the total value of construction contracts awarded per year. In view of this, there is an increasing need to objectively identify a forecasting technique which can produce accurate demand forecasts for this vital sector of the economy. The three techniques examined in the present study are the univariate Box‐Jenkins approach, the multiple loglinear regression and artificial neural networks. A comparison of the accuracy of the demand models developed shows that the artificial neural network model performs best overall. The univariate Box‐Jenkins model is the next best, while the multiple loglinear regression model is the least accurate. Relative measures of forecasting accuracy dealing with percentage errors are used to compare the forecasting accuracy of the three different techniques.
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Abdelmonem Oueslati and Yacine Hammami
This paper aims to investigate the performance of various return forecasting variables and methods in Saudi Arabia and Malaysia. The authors document that market excess returns in…
Abstract
Purpose
This paper aims to investigate the performance of various return forecasting variables and methods in Saudi Arabia and Malaysia. The authors document that market excess returns in Saudi Arabia are predicted by changes in oil prices, the dividend yield and inflation, whereas the equity premium in Malaysia is predicted only by the US market excess returns. In both countries, the authors find that the diffusion index is the best forecasting method and stock return predictability is stronger in expansions than in recessions. To interpret the findings, the authors perform two tests. The empirical results suggest irrational pricing in Malaysia and rationally time-varying expected returns in Saudi Arabia.
Design/methodology/approach
The authors apply the state-of-the-art in-sample and out-of-sample forecasting techniques to predict stock returns in Saudi Arabia and Malaysia.
Findings
The Saudi equity premium is predicted by oil prices, dividend yield and inflation. The Malaysian equity premium is predicted by the US market excess returns. In both countries, the authors find that the diffusion index is the best forecasting method. In both countries, predictability is stronger in expansions than in recessions. The tests suggest irrational pricing in Malaysia and rationality in Saudi Arabia.
Practical implications
The empirical results have some practical implications. The fact that stock returns are predictable in Saudi Arabia makes it possible for policymakers to better evaluate future business conditions, and thus to take appropriate decisions regarding economic and monetary policy. In Malaysia, the results of this study have interesting implications for portfolio management. The fact that the Malaysian market seems to be inefficient suggests the presence of strong opportunities for sophisticated investors, such as hedge and mutual funds.
Originality/value
First, there are no papers that have studied the return predictability in Saudi Arabia in spite of its importance as an emerging market. Second, the methods that combine all predictive variables such as the diffusion index or the kitchen sink methods have not been implemented in emerging markets. Third, this paper is the first study to deal with time-varying short-horizon predictability in emerging countries.
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The purpose of this paper is to analyze the ex ante projected future trajectories of real tourism exports and relative tourism export prices of the EU-15, conditional on expert…
Abstract
Purpose
The purpose of this paper is to analyze the ex ante projected future trajectories of real tourism exports and relative tourism export prices of the EU-15, conditional on expert real gross domestic product growth forecasts for the global economy provided by the Organisation for Economic Co-operation and Development for the years 2013-2017.
Design/methodology/approach
To this end, the global vector autoregression (GVAR) framework is applied to a comprehensive panel data set ranging from 1994Q1 to 2013Q3 for a cross-section of 45 countries. This approach allows for interdependencies between countries that are assumed to be equally affected by common global developments.
Findings
In line with economic theory, growing global tourist income combined with decreasing relative destination price ensures, in general, increasing tourism demand for the politically and macroeconomically distressed EU-15. However, the conditional forecast increases in tourism demand are under-proportional for some EU-15 member countries.
Practical implications
Rather than simply relying on increases in tourist income, the low price competitiveness of the EU-15 member countries should also be addressed by tourism planners and developers in order to counter the rising competition for global market shares and ensure future tourism export earnings.
Originality/value
One major contribution of this research is that it applies the novel GVAR framework to a research question in tourism demand analysis and forecasting. Furthermore, the analysis of the ex ante conditionally projected future trajectories of real tourism exports and relative tourism export prices of the EU-15 is a novel aspect in the tourism literature since conditional forecasting has rarely been performed in this discipline to date, in particular, in combination with ex ante forecasting.
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Dharyll Prince Mariscal Abellana, Donna Marie Canizares Rivero, Ma. Elena Aparente and Aries Rivero
This paper aims to propose a hybrid-forecasting model for long-term tourism demand forecasting. As such, it attempts to model the tourism demand in the Philippines, which is a…
Abstract
Purpose
This paper aims to propose a hybrid-forecasting model for long-term tourism demand forecasting. As such, it attempts to model the tourism demand in the Philippines, which is a relatively underrepresented area in the literature, despite its tourism sector’s growing economic progress.
Design/methodology/approach
A hybrid support vector regression (SVR) – seasonal autoregressive integrated moving averages (SARIMA) model is proposed to model the seasonal, linear and nonlinear components of the tourism demand in a destination country. The paper further proposes the use of multiple criteria decision-making (MCDM) approaches in selecting the best forecasting model among a set of considered models. As such, a preference ranking organization method for enrichment of evaluations (PROMETHEE) II is used to rank the considered forecasting models.
Findings
The proposed hybrid SVR-SARIMA model is the best performing model among a set of considered models in this paper using performance criteria that evaluate the errors of magnitude, directionality and trend change, of a forecasting model. Moreover, the use of the MCDM approach is found to be a relevant and prospective approach in selecting the best forecasting model among a set of models.
Originality/value
The novelty of this paper lies in several aspects. First, this paper pioneers the demonstration of the SVR-SARIMA model’s capability in forecasting long-term tourism demand. Second, this paper is the first to have proposed and demonstrated the use of an MCDM approach for performing model selection in forecasting. Finally, this paper is one of the very few papers to provide lenses on the current status of Philippine tourism demand.
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James M.W. Wong, Albert P.C. Chan and Y.H. Chiang
The purpose of this paper is to examine the performance of the vector error‐correction (VEC) econometric modelling technique in predicting short‐ to medium‐term construction…
Abstract
Purpose
The purpose of this paper is to examine the performance of the vector error‐correction (VEC) econometric modelling technique in predicting short‐ to medium‐term construction manpower demand.
Design/methodology/approach
The VEC modelling technique is evaluated with two conventional forecasting methods: the Box‐Jenkins approach and the multiple regression analysis, based on the forecasting accuracy on construction manpower demand.
Findings
While the forecasting reliability of the VEC modelling technique is slightly inferior to the multiple log‐linear regression analysis in terms of forecasting accuracy, the error correction econometric modelling technique outperformed the Box‐Jenkins approach. The VEC and the multiple linear regression analysis in forecasting can better capture the causal relationship between the construction manpower demand and the associated factors.
Practical implications
Accurate predictions of the level of manpower demand are important for the formulation of successful policy to minimise possible future skill mismatch.
Originality/value
The accuracy of econometric modelling technique has not been evaluated empirically in construction manpower forecasting. This paper unveils the predictability of the prevailing manpower demand forecasting modelling techniques. Additionally, economic indicators that are significantly related to construction manpower demand are identified to facilitate human resource planning, and policy simulation and formulation in construction.
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Paul M. Mitchell and Paul F. McNamara
Forecasts of rental growth are increasingly being required by and provided to property investors by a growing number of suppliers. Reviews the uses to which such forecasts are put…
Abstract
Forecasts of rental growth are increasingly being required by and provided to property investors by a growing number of suppliers. Reviews the uses to which such forecasts are put by a major Uk institutional investor and, from a relatively unique vantage point, critically reviews the forecasting services available in the marketplace. In doing so, it identifies the main forecasting approaches adopted, highlights some of the clear inconsistencies between forecasters in terms of what they are forecasting, how they are forecasting and the different data sources they are using. Explains some of the causes for substantial variations observed in the forecasts provided and, finally, explores the potential for systematic forecasting errors. Concludes by emphasizing the need to switch attention from technical methods to improved “view formation”.
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