Forecasting the oil price using house prices

    Research output: Working paperDiscussion paper

    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 ex- plain these forecast improvements with the dominant role of the oil industry in Aberdeen. House prices aggregate the dispersed knowl- edge of the future oil price that exists in the city. We obtain similar empirical evidence for Houston, another city dominated by the oil in- dustry. 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.
    Original languageEnglish
    Place of PublicationBerlin
    PublisherHumboldt-Universität zu Berlin
    Number of pages56
    Publication statusPublished - 2015

    Publication series

    NameSFB 649 Discussion Paper
    No.2015-041

    Keywords

    • oil price forecasting
    • house prices
    • knowledge spillover

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