Housing price dynamics: The impact of stock market sentiment and the spillover effect

Yao Zheng and Eric Osmer

The Quarterly Review of Economics and Finance, 2021, vol. 80, issue C, 854-867

Abstract: We examine the cross-market impact of U.S. stock market sentiment on U.S. housing prices from January 1991 to December 2014. We find that median housing price returns are typically higher during periods of pessimistic sentiment. We also find, using a VAR-GARCH-in-mean model, that these returns have a differential response to positive and negative sentiment shocks. Additionally, based on a VAR framework developed by Yilmaz and Diebold (2009), we find indications of a strong return spillover effect which is mostly self-contained within the housing market. Finally, using a DCC model, we find that correlations between aggregate stock market sentiment and housing returns are time-varying and rising during economic recessions.

Keywords: Aggregate stock market sentiment; Dynamic conditional correlation; Real estate; Return spillover; Segmentation; VAR-GARCH-M (search for similar items in EconPapers)
JEL-codes: G10 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:80:y:2021:i:c:p:854-867

DOI: 10.1016/j.qref.2019.02.006

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