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How do housing markets comove with the financial system? Evidence from dynamic risk spillovers

Author

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  • Duan, Kun
  • Shan, Shuwen
  • Huang, Yingying
  • Urquhart, Andrew

Abstract

This paper builds a dynamic risk spillover network to study how housing markets evolve with the financial system by using a time-varying parameter VAR (TVP-VAR) model. We propose theoretical arguments, supported by empirical findings drawn based on a comprehensive international dataset, to show that housing markets in the US and China are respectively the largest and least information transmitters in the spillover dynamics. Moreover, the cross-market risk spillover features an asymmetric pattern that housing markets receive more information from the financial system, and spillover within housing markets is found to be stronger than that within the financial system. As for the spillover within the latter, the green asset and stock markets are shown to be the two largest sources of information transmission. Our results should be of interest to stakeholders and policy makers regarding the crucial role of the housing market in risk management toward financial stability.

Suggested Citation

  • Duan, Kun & Shan, Shuwen & Huang, Yingying & Urquhart, Andrew, 2025. "How do housing markets comove with the financial system? Evidence from dynamic risk spillovers," Research in International Business and Finance, Elsevier, vol. 77(PB).
    • Handle: RePEc:eee:riibaf:v:77:y:2025:i:pb:s0275531925002430
    DOI: 10.1016/j.ribaf.2025.102987
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