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Leading indicators for the US housing market: New empirical evidence and thoughts about implications for risk managers and ESG investors

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  • Basse, Tobias
  • Desmyter, Steven
  • Saft, Danilo
  • Wegener, Christoph

Abstract

We argue that financial risk managers should focus more strongly on developing forward-looking early warning indicator systems for the North American real estate market. Based on time series data from the US housing market that focuses on the subprime crisis and the period directly after this event, we discuss possible information that such early warning indicator systems could be based on and analyze the presence of a lead-lag relationship between US housing starts and the Architectural Billings Index. We find evidence for such a relation using two different approaches, namely Granger causality tests and transfer entropy analyses. We then discuss the implications of our findings for financial risk managers as well as for ESG investors.

Suggested Citation

  • Basse, Tobias & Desmyter, Steven & Saft, Danilo & Wegener, Christoph, 2023. "Leading indicators for the US housing market: New empirical evidence and thoughts about implications for risk managers and ESG investors," International Review of Financial Analysis, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:finana:v:89:y:2023:i:c:s1057521923002818
    DOI: 10.1016/j.irfa.2023.102765
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    More about this item

    Keywords

    US housing market; Leading indicators; Risk management; ESG investing; House prices; Sentiment indicators;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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