Leading indicators for the US housing market: New empirical evidence and thoughts about implications for risk managers and ESG investors

Tobias Basse, Steven Desmyter, Danilo Saft and Christoph Wegener

International Review of Financial Analysis, 2023, vol. 89, issue C

Abstract: We argue that financial risk managers should focus more strongly on developing forward-looking early warning indicator systems for the North American real estate market. Based on time series data from the US housing market that focuses on the subprime crisis and the period directly after this event, we discuss possible information that such early warning indicator systems could be based on and analyze the presence of a lead-lag relationship between US housing starts and the Architectural Billings Index. We find evidence for such a relation using two different approaches, namely Granger causality tests and transfer entropy analyses. We then discuss the implications of our findings for financial risk managers as well as for ESG investors.

Keywords: US housing market; Leading indicators; Risk management; ESG investing; House prices; Sentiment indicators (search for similar items in EconPapers)
JEL-codes: G17 I31 M14 R31 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:89:y:2023:i:c:s1057521923002818

DOI: 10.1016/j.irfa.2023.102765

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