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Stock Prices, Regional Housing Prices, and Aggregate Technology Shocks

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  • Yoshida, Jiro

Abstract

The correlation between stock and housing prices, which is critical for household asset allocations, varies widely by metropolitan area and country. A general equilibrium model demonstrates that an aggregate positive technology shock increases stock prices and housing demand but can decrease housing prices where land supply is elastic because stable future rents are discounted at higher interest rates. Using panel data of U.S. metropolitan areas and OECD countries, I find that the housing price response to TFP shocks as well as the stock-housing correlation are smaller and even negative where the housing supply is elastic. I also find that household equity investment is positively related to housing supply elasticity.

Suggested Citation

  • Yoshida, Jiro, 2017. "Stock Prices, Regional Housing Prices, and Aggregate Technology Shocks," HIT-REFINED Working Paper Series 72, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:remfce:72
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/28838/wp072.pdf
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    More about this item

    Keywords

    macroeconomic shocks; total factor productivity; general equilibrium; regional heterogeneity; house price; housing supply elasticity; asset allocation;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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