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Time-varying causality between stock and housing markets in China

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  • Shi, Guangping
  • Liu, Xiaoxing
  • Zhang, Xu

Abstract

Based on the rolling-window bootstrap Granger causality test, this paper investigates the relationship between stock and housing markets from the perspective of China's first-, second- and third-tier cities. The result indicates that the relations between stock and housing prices change across time and city tiers. The causality mainly exists in bull market periods and financial crises. During a bull market, the effect of stock prices on housing prices is positive in cities of all tiers, and the strongest effect is found in first-tier cities; during a financial crisis, housing prices have a negative effect on stock prices, and the effect diminishes gradually from first-tier cities to third-tier cities. Therefore, economic policy makers could take these differences into account to improve policy efficiency.

Suggested Citation

  • Shi, Guangping & Liu, Xiaoxing & Zhang, Xu, 2017. "Time-varying causality between stock and housing markets in China," Finance Research Letters, Elsevier, vol. 22(C), pages 227-232.
    • Handle: RePEc:eee:finlet:v:22:y:2017:i:c:p:227-232
    DOI: 10.1016/j.frl.2017.06.003
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    Cited by:

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    2. Wang, Kai-Hua & Zhao, Yan-Xin & Jiang, Cui-Feng & Li, Zheng-Zheng, 2022. "Does green finance inspire sustainable development? Evidence from a global perspective," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 412-426.
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    6. Xunfa Lu & Zhitao Ye & Kin Keung Lai & Hairong Cui & Xiao Lin, 2022. "Time-Varying Causalities in Prices and Volatilities between the Cross-Listed Stocks in Chinese Mainland and Hong Kong Stock Markets," Mathematics, MDPI, vol. 10(4), pages 1-19, February.
    7. Deev, Oleg & Lyócsa, Štefan & Výrost, Tomáš, 2022. "The looming crisis in the Chinese stock market? Left-tail exposure analysis of Chinese stocks to Evergrande," Finance Research Letters, Elsevier, vol. 49(C).
    8. Lin, Wen-Yuan & Tsai, I-Chun, 2019. "Trader differences in Shanghai’s A-share and B-share markets: Effects on interaction with the Shanghai housing market," Journal of Asian Economics, Elsevier, vol. 64(C), pages 1-1.
    9. Chen, Chien-Fu & Chiang, Shu-hen, 2022. "Portfolio diversification possibilities between the stock and housing markets in G7 countries: Evidence from the time-varying Granger causality," Finance Research Letters, Elsevier, vol. 49(C).
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    More about this item

    Keywords

    Stock prices; Housing prices; Cities; Time-varying causality;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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