Relationship between the United States housing and stock markets: Some evidence from wavelet analysis

Kim Hiang Liow* (Corresponding Author), Yuting Huang, Jeongseop Song

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    20 Citations (Scopus)

    Abstract

    We revisit the relationship between the United States housing and stock markets in time-frequency domain. Earlier research does not have satisfactory results on the interactions between the two markets because traditional methods average different relationships in time domain only. Our novel and informative wavelet-based multi-resolution analyzes indicate that the US housing and stock markets are at best moderately integrated and with scale-dependent co-movement, connectivity and causality. The interplay between the US housing and stock markets is stronger in the long run, with the two asset markets being bilaterally causally linked and have stronger return and volatility transmission effects. Finally, we demonstrate that the decomposition of the relationship between the real estate and stock markets over the different scales has important implications in studying the optimal portfolio weight and the hedge ratio in risk management.
    Original languageEnglish
    Article number101033
    Number of pages25
    JournalThe North American Journal of Economics and Finance
    Volume50
    Early online date19 Aug 2019
    DOIs
    Publication statusPublished - 1 Nov 2019

    Bibliographical note

    Acknowledgement
    The first author wishes to acknowledge the financial support provided by NUS on the research project R-297-000-132-646 which this paper is related to.

    Data Availability Statement

    No data availability statement.

    Keywords

    • US housing and stock markets
    • Wavelets
    • time-scales
    • market integration
    • credit price effect
    • wealth effect

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