NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Liang Peng

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Working Papers

September 2009The Subprime Crisis and House Price Appreciation
with William N. Goetzmann, Jacqueline Yen: w15334
This paper argues that econometric analysis of housing price indexes before 2006 generated forecasts of future long-term price growth and low estimated probabilities of extreme price decreases. These forecasts of future increases in home-loan collateral values may have affected both the demand and the supply of mortgages. Standard time series models using repeat-sales indices suggested that positive trends had a long half-life. Expectations based on such models supported expectations that could lead to an asset bubble. Analysis of data from the HMDA loan data base and LoanPerformance.com at the MSA level and at the loan level substantiates both supply and demand effects of past price trends in housing markets, particularly with respect to subprime mortgage applications and approvals. A...
April 2001The Bias of the RSR Estimator and the Accuracy of Some Alternatives
with William N. Goetzmann: t0270
This paper analyzes the implications of cross-sectional heteroskedasticity in repeat sales regression (RSR). RSR estimators are essentially geometric averages of individual asset returns because of the logarithmic transformation of price relatives. We show that the cross sectional variance of asset returns affects the magnitude of bias in the average return estimate for that period, while reducing the bias for the surrounding periods. It is not easy to use an approximation method to correct the bias problem. We suggest a maximum-likelihood alternative to the RSR that directly estimates index returns that are analogous to the RSR estimators but are arithmetic averages of individual returns. Simulations show that these estimators are robust to time-varying cross-sectional variance and may be...

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