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Asymmetric causality between the U.S. housing market and its stock market: Evidence from state level data

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  • Bahmani-Oskooee, Mohsen
  • Ghodsi, Seyed Hesam

Abstract

Previous research that investigated the link between the U.S. housing market and its stock market concentrated on the wealth effect by assuming the stock prices to be another determinant of house prices. However, the meltdown of housing market and its subsequent impact on the stock market and the U.S. economy in 2008 pointed to causal relation that could run from housing market to stock market. When we tested this hypothesis using state level data, we found short-run symmetric causality from stock prices to house prices in 10 states and from house prices to stock prices in 20 states. However, when we engaged in asymmetric causality, these numbers increased to 25 and 41 respectively. Surprisingly, in 39 out of 41 states in which house prices caused stock prices, it was decline in house prices that caused stock prices, supporting the events of 2008 as well as asymmetric impacts. We also found cointegration of the two markets in more than half of the states.

Suggested Citation

  • Bahmani-Oskooee, Mohsen & Ghodsi, Seyed Hesam, 2018. "Asymmetric causality between the U.S. housing market and its stock market: Evidence from state level data," The Journal of Economic Asymmetries, Elsevier, vol. 18(C), pages 1-1.
    • Handle: RePEc:eee:joecas:v:18:y:2018:i:c:11
    DOI: 10.1016/j.jeca.2018.e00095
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    Cited by:

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    4. Alqaralleh, Huthaifa & Canepa, Alessandra & Salah Uddin, Gazi, 2023. "Dynamic relations between housing Markets, stock Markets, and uncertainty in global Cities: A Time-Frequency approach," The North American Journal of Economics and Finance, Elsevier, vol. 68(C).
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    7. Duran, Hasan Engin & Özdoğan, Hilal, 2020. "Asymmetries across regional housing markets in Turkey," The Journal of Economic Asymmetries, Elsevier, vol. 22(C).
    8. Mohsen Bahmani-Oskooee & Huseyin Karamelikli, 2022. "Exchange Rate Volatility and Commodity Trade between U.K. and China: An Asymmetric Analysis," Chinese Economy, Taylor & Francis Journals, vol. 55(1), pages 41-65, January.
    9. Sepehrdoust, Hamid & Ahmadvand, Shokoufeh & Mirzaei, Nesa, 2022. "Impact of information, communication technology and housing industry on financial market development," Technology in Society, Elsevier, vol. 69(C).
    10. Xunfa Lu & Zhitao Ye & Kin Keung Lai & Hairong Cui & Xiao Lin, 2022. "Time-Varying Causalities in Prices and Volatilities between the Cross-Listed Stocks in Chinese Mainland and Hong Kong Stock Markets," Mathematics, MDPI, vol. 10(4), pages 1-19, February.
    11. M Bahmani-Oskooee & H Harvey, 2023. "Whose Policy Uncertainty Matters in the Trade between Mexico and the US?," Economic Issues Journal Articles, Economic Issues, vol. 28(2), pages 39-69, September.
    12. Bahmani-Oskooee, Mohsen & Nouira, Ridha, 2021. "The nonlinear ARDL approach and productivity bias hypothesis: Evidence from 68 countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 80-89.
    13. Mohsen Bahmani‐Oskooee & Jungho Baek, 2021. "On the asymmetric effects of exchange‐rate volatility on trade flows: Evidence from Korea‐U.S. commodity trade," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 594-629, December.
    14. Hong, Yun & Li, Yi, 2020. "Housing prices and investor sentiment dynamics: Evidence from China using a wavelet approach," Finance Research Letters, Elsevier, vol. 35(C).
    15. Mohsen Bahmani-Oskooee & Jungho Baek, 2021. "Whose Policy Uncertainty Matters in the Trade between Korea and the U.S.?," JRFM, MDPI, vol. 14(11), pages 1-23, November.
    16. Xu, Jia & Bahmani-Oskooee, Mohsen & Karamelikli, Huseyin, 2022. "China’s trade in services and role of the exchange rate: An asymmetric analysis," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 747-757.
    17. Bahmani-Oskooee, Mohsen & Karamelikli, Huseyin, 2021. "Financial and insurance services trade and role of the exchange rate: An asymmetric analysis," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 358-367.
    18. Mohsen Bahmani-Oskooee & Jia Xu, 2022. "Whose policy uncertainty matters in the trade between China and the U.S.?," Economic Change and Restructuring, Springer, vol. 55(3), pages 1497-1542, August.
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    More about this item

    Keywords

    Asymmetric causality; House prices; Stock prices; State level data;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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