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Interactions between mortgage and other capital markets in the USA: has financial deregulation made a difference?

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  • Ali Darrat
  • Ross Dickens
  • Osamah Al-Khazali

Abstract

The degree of short- and long-term interreactions between the mortgage and other capital markets in the USA is explored. The study also investigates whether financial market deregulation impacts the underlying interrelations. Theory alone provides little practical guidance on both issues. The empirical results are derived from monthly data using multivariate models and numerous sensitivity tests. The results consistently support regulators' common posture that the mortgage market is essentially localized over the long term. Nevertheless, the results do show that the mortgage market exhibits pronounced short-term interrelations with other capital markets, especially the long-term Treasury security market. Compelling evidence is also found that financial market deregulation had little impact on the degree of markets' interrelations.

Suggested Citation

  • Ali Darrat & Ross Dickens & Osamah Al-Khazali, 2006. "Interactions between mortgage and other capital markets in the USA: has financial deregulation made a difference?," Applied Financial Economics, Taylor & Francis Journals, vol. 16(4), pages 335-345.
    • Handle: RePEc:taf:apfiec:v:16:y:2006:i:4:p:335-345
    DOI: 10.1080/09603100500186606
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    1. Hamid Baghestani, 2008. "Consensus vs. Time‐series Forecasts of US 30‐year Home Mortgage Rates," Journal of Property Research, Taylor & Francis Journals, vol. 25(1), pages 45-60, January.
    2. Baghestani, Hamid, 2008. "A random walk approach to predicting US 30-year home mortgage rates," Journal of Housing Economics, Elsevier, vol. 17(3), pages 225-233, September.
    3. Hamid Baghestani, 2017. "Do US consumer survey data help beat the random walk in forecasting mortgage rates?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1343017-134, January.

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