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Unveiling investors' substitution behavior: Stock trading decisions in response to housing market dynamics

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  • Lü, Yiqing
  • Zhao, Bin
  • Zhu, Ning

Abstract

Utilizing positive quasi-random shocks to local housing prices in Shanghai, we show that stock investors who experienced significant returns from the real estate market traded less actively, took less risk, and spent less effort trading. We confirm the effect of housing price changes on investors' trading behavior in a national sample. Our findings suggest a substitution effect between the real estate and stock market and highlight the importance of understanding investors' trading behavior in light of intertemporal variations in other asset market.

Suggested Citation

  • Lü, Yiqing & Zhao, Bin & Zhu, Ning, 2024. "Unveiling investors' substitution behavior: Stock trading decisions in response to housing market dynamics," Journal of Corporate Finance, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:corfin:v:86:y:2024:i:c:s092911992400052x
    DOI: 10.1016/j.jcorpfin.2024.102590
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    More about this item

    Keywords

    Housing price changes; Stock trading; Individual investors; Substitution effect;
    All these keywords.

    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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