Question: In Chapter 11 (VAR systems), we analyzed the dynamics of house prices in two different locations. Riverside and Los Angeles. California. It would be interesting

In Chapter 11 (VAR systems), we analyzed the dynamics of house prices in two different locations. Riverside and Los Angeles. California. It would be interesting to investigate whether there is long-term equilibrium for house prices in both locations. If there is. the forecasting model(s) may be different from those in Chapter 11. Go ahead and analyze whether house prices in Riverside and Los Angeles are cointegratech If they are, find the best forecasting model, construct the 1–, 2–, and 3-step-ahead forecasts, and comment on the differences you may find with the previous forecasts.

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Let ILA and IRV denote Los Angeles and Riverside house price index series respectively In Figure 11 ... View full answer

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