The Relationship between House Prices and Stock Prices in Saudi Arabia: An Empirical Analysis

Abstract

This paper investigates empirically the relationship between stock market prices and house prices in Saudi Arabia. Using yearly data for the period from 1985 to 2012 we conducted a Granger-causality test, Impulse response functions and Variance decompositions that were simulated from the estimated unrestricted vector autoregressive (VAR). Results suggest that stock market and economic growth play a major role in determining house prices. Granger causality results show that stock market prices and the economic growth have a causal impact on house prices. Impulse response functions indicate there is a negative relationship between stock market prices and house prices and also there is a positive relationship between economic growth and house prices. Variance decompositions show that the stock market prices is the most important variable that explains the variation of house prices, followed by economic growth.

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

“…The results imply that, along with the increase in the house prices, there is a significant decrease in the stock prices; therefore, the desirable policy instruments are required to evaluate the impact of house prices on the stock market in a given countries contexts. The results are consistent with previous studies of Batayneh and Al-Malki (2015) and Nyakabawo et al (2015), both these studies confirmed the negative relationship between stock prices and house prices across their countries. The short-and long-run causality results are shown in Table 4.…”

“…Kallberg, Liu, and Pasquariello (2014) confirmed the co-movement between stock and house prices that largely exists due to sound financial markets in US' metropolitan areas. Batayneh and Al-Malki (2015) concluded that house prices have a significant and positive association with the stock prices in Saudi Arabia financial markets that escalate a country's economic growth; on the other hand, the study established the stock led house prices in a country. Nyakabawo, Miller, Balcilar, Das, and Gupta (2015) supported the house prices led the economic growth hypothesis by using the consistent time series quarterly data of the US, which shows the soundness of the financial market to support the economic system in a country.…”

Examination of the International Causal Directions between Rates of Return on the Price Indices of the Selected Real Estate Markets in the CEE Region Using Wavelet Analysis

“…Despite the indicated results, the wavelet analyses have been performed in the scope of all of the considered hypotheses in order to check the existence of the statistically significant co-movement between the considered time series and to verify the stability of their causal directions. Table II, additionally, depicts the results of the tests on the domestic causal relationships between the direct and indirect property price levels [48]. difference functions depicted in Figs.…”

Analyzing the Causality and Dependence between Exchange Rate and Real Estate Prices in Boom-and-Bust Markets: Quantile Causality and DCC Copula GARCH Approaches

“…Gallin [7] have revealed household income and mortgage rates to be the main determinants. Later, the studies of Chen et al [1], Mikhed and Zemcik [8], Kim and Bhattacharya [9], Holly et al [10], Zhou [11], Abbott and De Vita [12,13], Ding et al [14], Batayneh and Al [15], and Apergis et al [16] found that household debt, stock prices, construction costs, and policy uncertainty were other factors that affect housing prices. In the case of multivariate analysis, Gete and Reher [17] investigated seven potential drivers of housing prices in China using the structural vector autoregressive (SVAR) method, namely population, credit standards, housing preferences, savings rates, expected productivity progress, changes in land supply, and tax policy.…”