Well mother cat. A z-score of 1.5 does not represent a % increase in house prices. As my illustration shows, house prices have increased by 60%, but the z-score is 2.48. You're welcome to point out any mistakes to the calculation.
"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
Which you drew a line from to house prices in 2000-2003 ....
No idea what you're talking about.
Quote:
Could be? So you you are simultaneously (1) absolutely positive it is calculated using a different data set and (2) don't know how it is calculated.
1. Yes, Z for house prices is not calculated using a mining investment data set. Different data sets for each Z score.
2. We don't know specifically what data set is used for each Z score. For example, Citi calls one of them "house price" but that could be a range of things. Could be house price to income ratio, price/rent ratio, real prices etc. The IMF likes to calculate Z for the rent/price ratio (which according to Roddy is impossible to do)...
"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
Your observation that the bubble meter was at -0.5 before house prices boomed in 2000-2003
Quote:
1. Yes, Z for house prices is not calculated using a mining investment data set. Different data sets for each Z score.
Fascinating. But we were discussing how the bubble meter is calculated differently to the individual Z scores. You insisted that the Bubble Meter is calculated from different data sets than the individual Z scores, even though you don't know how it is calculated.
Quote:
We don't know specifically what data set is used for each Z score.
Why does that matter? All that matters is that the metric doesn't change over time so you can be sure of temporal consistency.
Quote:
For example, Citi calls one of them "house price" but that could be a range of things. Could be house price to income ratio, price/rent ratio, real prices etc. The IMF likes to calculate Z for the rent/price ratio
From a statistical point of view it is irrelevant which metric is used. Variance is the rate of change.
Speak when you are angry and you will make the best speech you will ever regret. Ambrose Bierce
1. Yes, Z for house prices is not calculated using a mining investment data set. Different data sets for each Z score.
2. We don't know specifically what data set is used for each Z score. For example, Citi calls one of them "house price" but that could be a range of things. Could be house price to income ratio, price/rent ratio, real prices etc. The IMF likes to calculate Z for the rent/price ratio (which according to Roddy is impossible to do)...
Mother cat. The reason why z-scores are used in the bubble meter is to standardize the data. The 5 components used (bond prices are almost irrelevant) comprise the bubble meter, not in a simple arithmetic function like you intuitively think of, but as a construct in itself. The relative difference between the bubble meter z-score and the z-score for each component is what is important, as Citi has claimed. Regardless of what data is used for house prices, the absolute distance between the z-scores is what is important. That is why Citi is warning about the potential for deflation.
Jon Snow
13 Oct 2016, 08:33 PM
From a statistical point of view it is irrelevant which metric is used. Variance is the rate of change.
Yes. Citi probably uses indexed values as they are focused on "house prices."
Your observation that the bubble meter was at -0.5 before house prices boomed in 2000-2003
Yes. Last time the "bubble meter" was at this level, Sydney house prices rose for the following three years. Just an observation.
Quote:
You insisted that the Bubble Meter is calculated from different data sets than the individual Z scores, even though you don't know how it is calculated.
Yes, five different data sets for each component's Z score, and a 6th data set, which encompasses the other components, used to create the bubble meter.
Quote:
Why does that matter?
Because the price/income ratio, for example, is a stronger predictor of bubbles than real or nominal house prices.
Quote:
All that matters is that the metric doesn't change over time so you can be sure of temporal consistency.
That's certainly important, but it's not the only thing that matters.
Quote:
From a statistical point of view it is irrelevant which metric is used. Variance is the rate of change.
From a statistical point of view, maybe so. But from a practical point of view, a metric like the price/income ratio is a better bubble indicator than a metric like nominal prices.
"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
Yes. Last time the "bubble meter" was at this level, Sydney house prices rose for the following three years. Just an observation.
Yes, five different data sets for each component's Z score, and a 6th data set, which encompasses the other components, used to create the bubble meter.
Because the price/income ratio, for example, is a stronger predictor of bubbles than real or nominal house prices.
That's certainly important, but it's not the only thing that matters.
From a statistical point of view, maybe so. But from a practical point of view, a metric like the price/income ratio is a better bubble indicator than a metric like nominal prices.
Yes. Last time the "bubble meter" was at this level, Sydney house prices rose for the following three years. Just an observation.
It's not predictive modelling.
Yes, five different data sets for each component's Z score, and a 6th data set, which encompasses the other components, used to create the bubble meter.
No, there are 5 data sets that are used to construct the bubble meter.
From a statistical point of view, maybe so. But from a practical point of view, a metric like the price/income ratio is a better bubble indicator than a metric like nominal prices.
Statistics can reveal phenomenon that you are unaware of mother cat. A price to income ratio is very simplistic from a statistical POV. You don't understand how to calculate z-scores across multiple components and you can't interpret z-scores so you can't really comment.
"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy