The Role of Housing Mortgage Leverage in Stock Asset Pricing: Evidence from the Chinese A-share Market

Qi-an Chen (), Huashi Li (), Jianyi Lin () and Yunfeng Gao ()
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Qi-an Chen: Chongqing University
Huashi Li: Chongqing University
Jianyi Lin: Chongqing University
Yunfeng Gao: Southwest University

The Journal of Real Estate Finance and Economics, 2025, vol. 71, issue 2, No 3, 209-253

Abstract: Abstract This study detects the linkage between housing mortgage leverage and stock asset pricing in China’s A-share stock market. We deduce relevant asset pricing models in which a significant pricing factor—termed the housing-mortgage-leverage factor and measured by the growth rate of housing mortgage leverage—is included. Based on these models, corresponding empirical tests on the role of housing mortgage leverage in stock asset pricing are conducted in the Chinese A-share stock market. Congruently, two significant results are presented. First, the housing mortgage-leverage factor positively correlates with excess stock returns, and the price of the housing mortgage-leverage risk is positive, giving rise to the premium associated with fluctuations in housing mortgage leverage. Second, the housing mortgage-leverage factor accounts for variations in cross-sectional stock returns and explains the size effect to some extent. On further reflection, an excessively rapid increase in housing mortgage leverage can somewhat result in dampening stock investments, in which smaller (larger) stocks suffer higher (lower) degrees of suppression.

Keywords: Housing mortgage leverage; Asset pricing; Size effect; A-share stock market (search for similar items in EconPapers)
JEL-codes: D11 D14 G11 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11146-023-09940-5

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