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The Role of Housing Mortgage Leverage in Stock Asset Pricing: Evidence from the Chinese A-share Market

Author

Listed:
  • Qi-an Chen

    (Chongqing University)

  • Huashi Li

    (Chongqing University)

  • Jianyi Lin

    (Chongqing University)

  • Yunfeng Gao

    (Southwest University)

Abstract

This study detects the linkage between housing mortgage leverage and stock asset pricing in China’s A-share stock market. We deduce relevant asset pricing models in which a significant pricing factor—termed the housing-mortgage-leverage factor and measured by the growth rate of housing mortgage leverage—is included. Based on these models, corresponding empirical tests on the role of housing mortgage leverage in stock asset pricing are conducted in the Chinese A-share stock market. Congruently, two significant results are presented. First, the housing mortgage-leverage factor positively correlates with excess stock returns, and the price of the housing mortgage-leverage risk is positive, giving rise to the premium associated with fluctuations in housing mortgage leverage. Second, the housing mortgage-leverage factor accounts for variations in cross-sectional stock returns and explains the size effect to some extent. On further reflection, an excessively rapid increase in housing mortgage leverage can somewhat result in dampening stock investments, in which smaller (larger) stocks suffer higher (lower) degrees of suppression.

Suggested Citation

  • Qi-an Chen & Huashi Li & Jianyi Lin & Yunfeng Gao, 2025. "The Role of Housing Mortgage Leverage in Stock Asset Pricing: Evidence from the Chinese A-share Market," The Journal of Real Estate Finance and Economics, Springer, vol. 71(2), pages 209-253, August.
    • Handle: RePEc:kap:jrefec:v:71:y:2025:i:2:d:10.1007_s11146-023-09940-5
    DOI: 10.1007/s11146-023-09940-5
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    Keywords

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    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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