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Financial stability and real estate price fluctuation in China

Chao Liu, Ying Zheng, Qi Zhao and Chao Wang

Physica A: Statistical Mechanics and its Applications, 2020, vol. 540, issue C

Abstract: The relationship between financial stability and the real estate market has received increasing attention. Understanding the interaction between them may monitor financial risk and real estate price fluctuation. This paper aims at examining the cross-correlation between financial stability and real estate price fluctuation in China. A measure of financial stability is constructed and the cross-correlation between financial stability and the real estate market is demonstrated by using detrended cross-correlation analysis (DCCA). Furthermore, multifractal asymmetric detrended cross-correlation analysis (MF-ADCCA) is used to evaluate the scaling properties of the cross-correlation among financial stability and real estate price fluctuation. Empirical results indicate that asymmetries exist in the cross-correlation and that the asymmetric cross-correlation is multifractal. The cross-correlation is related to the fluctuation magnitude if the financial stress index (or the growth rate in house prices) is in a different trend. Finally, DCCA analysis based on time-delay is employed to investigate transmission direction of the cross-correlation. Our findings indicate the transmission direction is bidirectional, but the impact of financial stability on real estate price fluctuation is larger than the impact in the reverse direction.

Keywords: Financial stability; Real estate market; Multifractal asymmetric detrended cross-correlation; Cross-correlation (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:540:y:2020:i:c:s0378437119316851

DOI: 10.1016/j.physa.2019.122980

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