Do house prices influence stock prices? Empirical investigation from the panel of selected European Union countries

Abstract

This study examines the long-run and causal relationship between house prices and stock prices in the panel of 22 European Union (EU) countries, covering the monthly data from January 2007 to October 2012. The results show that house prices and stock prices variables are stationary at their first difference, and Pedroni's heterogeneous cointegration test does not confirmed the long-run relationship between the two variables; hence, it is imperative to employed dynamic OLS estimator for robust statistical inference. The results of dynamic OLS (DOLS) reveal that, among 22 countries, there are five countries which show the negative association between house prices and stock prices, while except France and Italy, the remaining 15 countries show the positive relationship between the variables. There is no significant relationship observed in the case of France and Italy. The panel results confirmed the negative impact of house prices on stock prices in the region. The results of panel causality confirmed the stock led house prices in the short-run, while the causality runs in both directions between the variables in the long-run.

The Interconnectedness of Stock Prices, Money, and Credit Across Time and Frequency From 1970 to 2016

“…Our approach rests on the large impact of house prices on the business cycle (Leamer, 2015) and on waves of optimism and pessimism in the economy (Chahrour & Gaballo, 2021). Such a significant impact of housing on the economy can affect stock prices (Hong & Li, 2020;Bahmani-Oskooee & Ghodsi, 2018;Ali & Zaman, 2017). Indeed, the links between different macroeconomic variables may become stronger during booming house prices (Ryczkowski, 2019;Goodhart & Hofmann, 2008).…”

Housing price volatility: uncertainty, an asymmetric econometric analysis – some European country experiences

“…Yang and Turner (2016) explored the impact of macroeconomic shocks on housing price dynamics for Sweden and concluded that there is a long-run temporal diffusion of shocks between the region. Based on a panel set of observations for 22 countries in the European Union with monthly observations covering the period from 2007 to 2012, Ali and Zaman (2017) investigated the causal association between stock prices and housing prices. Among the countries, a negative causal association between stock prices and housing prices was revealed for five countries.…”

A study of factors influencing the price of apartments: Evidence from Vietnam

“…In China, many authors have studied the house price index, for example: Ding et al (2014), Shen et al (2016), Shi et al (2017) and Jiang et al (2018). In addition, several studies have analyzed house price index with data from many countries, for example: Arestis and Gonzalez (2014), Hui and Chan (2014), Lin and Fuerst (2014), Liow and Schindler (2014), Ali and Zaman (2017), Lim (2018). Motivated by this gap, the author expects this study can contribute to the current literature by establishing determinants of apartment prices in Ho Chi Minh city.…”