The Time-Series Properties on Housing Prices: A Case Study of the Southern California Market

We examine the time-series relationship between housing prices in eight Southern California metropolitan statistical areas (MSAs). First, we perform cointegration tests of the housing price indexes for the MSAs, finding seven cointegrating vectors. Thus, the evidence suggests that one common trend links the housing prices in these eight MSAs, a purchasing power parity finding for the housing prices in Southern California. Second, we perform temporal Granger causality tests revealing intertwined temporal relationships. The Santa Anna MSA leads the pack in temporally causing housing prices in six of the other seven MSAs, excluding only the San Luis Obispo MSA. The Oxnard MSA experienced the largest number of temporal effects from other MSAs, six of the seven, excluding only Los Angeles. The Santa Barbara MSA proved the most isolated in that it temporally caused housing prices in only two other MSAs (Los Angels and Oxnard) and housing prices in the Santa Anna MSA temporally caused prices in Santa Barbara. Third, we calculate out-of-sample forecasts in each MSA, using various vector autoregressive (VAR) and vector error-correction (VEC) models, as well as Bayesian, spatial, and causality versions of these models with various priors. Different specifications provide superior forecasts in the different MSAs. Finally, we consider the ability of theses time-series models to provide accurate out-of-sample predictions of turning points in housing prices that occurred in 2006:Q4. Recursive forecasts, where the sample is updated each quarter, provide reasonably good forecasts of turning points.

Bursting Boilers and the Federal Power Redux: The Evolution of Safety on the Western Rivers

Using newly constructed data series on explosions, deaths, and steamboat traffic, we examine econometrically the causes of increased safety in steamboat boilers in the nineteenth century. Although the law of 1852 (but not that of 1838) did have a dramatic initial effect in reducing explosions, that reduction came against the background not of a system out of control but of a system that from the beginning was steadily increasing boiler safety per person- mile. The role of the federal government in conducting and disseminating basic research on boiler technology may have been more significant for increased safety than its explicit regulatory efforts.