This is Argyn's blog. I comment on topics of my interests such as software, math, finance, and music. Also, I write about local events in Northern Virginia, USA and all things related to Kazakhstan

Tuesday, February 05, 2008

Standard deviation of OFHEO HPI "returns" increases linearly with sampling period length

I've been playing with OFHEO House Prise Index data this week. It's open access data and can be downloaded into CSV file from OFHEO's web site.

I copied Los Angeles MSA data into this spreadsheet. Columns A-G are original data columns. Columns C and are the year and the quarter. Column is E is HPI.

Columns G-I are HPI "returns" with quarterly, semi-annual and annual sampling. "Return" is r(t) = HPI(t) / HPI(t-lag) - 1, where lag is 1 for quarterly, 2 - for semi-annual and 4 - for annual. At the bottom of the spreadsheet there's standard deviation of these returns: 0.0253, 0.0482 and 0.0969. As you can see, it increases linearly with sampling period length.

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