How does appraisal lag smoothen the real estate index

I could understand how a moving average would smoothen an index return, but merely using lagged variables just uses values shift to a specific time period prior, not smoothening of values from one period to the next would occur here.

If the only problem were that the data were uniformly lagged, there would be no smoothing effect.

The smoothing arises because, as the curriculum states, “all properties in an appraisal-based index may not be appraised every quarter” (although what it should have said is that not all properties may be appraised every quarter). The smoothing arises from a lack of data.

Yep, real estate market could be very illiquid and dumb. So, it is perfect for hunter wolves, they will find good profit from time to time.

Lack of data

High investment tickets

Few participants (compared with stock and bond markets yeah)

In my opinion… unreliable indexes…