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The Causal Relationship between Real Estate and Stock Markets

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  • Okunev, John
  • Wilson, Patrick
  • Zurbruegg, Ralf

Abstract

This paper examines the dynamic relationship that exists between the US real estate and S&P 500 stock markets between the years of 1972 to 1998. This is achieved by conducting both linear and nonlinear causality tests. The results from these tests provide a number of interesting observations that primarily show linear relationships to be spuriously affected by structural shifts that are inherent within the data. Linear test results generally show a unidirectional relationship to exist from the real estate market to the stock market. However, these results are not consistent with financial theory and for all sub-samples of the data. In contrast, the nonlinear causality test shows a strong unidirectional relationship running from the stock market to the real estate market, and is consistent in the presence of any structural breaks. Copyright 2000 by Kluwer Academic Publishers

Suggested Citation

  • Okunev, John & Wilson, Patrick & Zurbruegg, Ralf, 2000. "The Causal Relationship between Real Estate and Stock Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 21(3), pages 251-261, November.
    • Handle: RePEc:kap:jrefec:v:21:y:2000:i:3:p:251-61
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    References listed on IDEAS

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