Economics at your fingertips  

Interactions between stock, bond and housing markets

Roberto Dieci, Noemi Schmitt and Frank Westerhoff ()

Journal of Economic Dynamics and Control, 2018, vol. 91, issue C, 43-70

Abstract: We develop a model in which investors can participate in stock, bond and housing markets. Investors’ market entry decisions are subject to herding effects and depend on the markets’ price trends and on their mispricings. The dynamics of our model is governed by a four-dimensional nonlinear map and its unique inner steady state is characterized by standard present-value relations between dividends, rents and the bond rate. Amongst other things, we show that endogenous stock and housing market dynamics emerge, countercyclical to each other, if investors react strongly to the markets’ price trends. Such a cross feedback reflects investors’ tendency to transfer their enthusiasm from one speculative market to another.

Keywords: Stock markets; Housing markets; Bond markets; Bounded rationality; Market interactions; Nonlinear dynamics (search for similar items in EconPapers)
JEL-codes: D84 G12 R21 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Interactions between stock, bond and housing markets (2018) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-09-27
Handle: RePEc:eee:dyncon:v:91:y:2018:i:c:p:43-70