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House Prices and Stock Prices: Evidence from a Dynamic Heterogeneous Panel in China

Author

Listed:
  • Nannan Yuan

    (Graduate School of Economics, Kobe University)

  • Shigeyuki Hamori

    (Graduate School of Economics, Kobe University)

  • Wang Chen

    (Graduate School of Economics, Kobe University)

Abstract

Several studies have focused on the relationship between stock and house prices, but they reached contradictory conclusions. This paper contributes to the literature by analyzing the effects of stock prices on house prices with panel data of 28 regions in China for the 2003:Q1 to 2012:Q4 period. Compared with the previous studies, we explain these contrasting effects by distinguishing between the long- and short-run effects of stock prices. Our main results show that stock prices have a negative effect on house prices in the long run but positive effects in the short run. Furthermore, we determine that high market openness and low composition risk account for the opposite short-run effects of stock prices.

Suggested Citation

  • Nannan Yuan & Shigeyuki Hamori & Wang Chen, 2014. "House Prices and Stock Prices: Evidence from a Dynamic Heterogeneous Panel in China," Discussion Papers 1428, Graduate School of Economics, Kobe University.
  • Handle: RePEc:koe:wpaper:1428
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    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2014/1428.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Yongheng Deng & Eric Girardin & Roselyne Joyeux & Shuping Shi, 2017. "Did bubbles migrate from the stock to the housing market in China between 2005 and 2010?," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 276-292, August.
    3. Deng, Yongheng & Girardin, Eric & Joyeux, Roselyne, 2018. "Fundamentals and the volatility of real estate prices in China: A sequential modelling strategy," China Economic Review, Elsevier, vol. 48(C), pages 205-222.
    4. Yongheng Deng & Eric Girardin & Roselyne Joyeux, 2015. "Fundamentals and the Volatility of Real Estate Prices in China: A Sequential Modelling Strategy," Working Papers 222015, Hong Kong Institute for Monetary Research.

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    More about this item

    Keywords

    house prices; stock prices; dynamic relationship;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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