The co-movement and causality between the U.S. housing and stock markets in the time and frequency domains

Abstract

This study applies wavelet analysis to examine the relationship between the U.S. housing and stock markets over the period 1890-2012. Wavelet analysis allows the simultaneous examination of co-movement and causality between the two markets in both the time and frequency domains. Our findings provide robust evidence that co-movement and causality vary across frequencies and evolve over time. Examining market co-movement in the time domain, the two markets exhibit positive co-movement over recent decades, except for 1998-2002 when a high negative co-movement emerged. In the frequency domain, the two markets correlate with each other mainly at low frequencies (longer term), except in the second half of the 1900s as well as in 1998-2002, when the two markets correlate at high frequencies (shorter term). In addition, we find that the causal effects between the markets in the frequency domain occur generally at low frequencies (longer term). In the time-domain, the time-varying nature of long-run causalities implies structural changes in the two markets. These findings provide a more complete picture of the relationship between the U.S. real estate and stock markets over time and frequency, offering important implications for policymakers (and practitioners).

How do housing prices affect consumption in China? New evidence from a continuous wavelet analysis

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The Analysis on Stock Price Synchronicity in China

“…As the practitioners own professional knowledge about the security market, their opinion will have great influence on the public by analyst coverage, particularly on the arbitrageurs without reason and the typical investors (Xiao-Lin Li, Tsangyao Chang, Stephen M. Miller, Mehmet Balcilard, Rangan Gupta, 2015) [4].…”

“…Encouraged by the Morck, Yeung, and Yu (2000), Tung Lam Dang, Fariborz Moshirian, Bohui Zhang (2015) assert that the greater capitalization of firmspecific information leads to lower price synchronicity from the perspective of information-efficiency view by making further investigation [2,3]. But the literatures mentioned before are compared about the stock price synchronicity between emerging economies and the developed economies, as China is a socialist state, there are many aspects different from the capitalist states, so it's significant to make specific investigation on China stock market as what the Li KunLei Yu, Xiaoxue Hu(2017) did [4].…”

Time–frequency relationship between US output with commodity and asset prices

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“…Benhmad (2013) investigates the cyclical co-movements between crude oil prices and the U.S. economic growth using wavelets, but only over the recent period and does not make abstraction of other variables' influence on business cycles. The paper by Li et al (2015) performs a time-frequency historical analysis of the relationship between the U.S. housing and stock markets prices. However, this paper does not address the influence of asset prices on the U.S. economic growth.…”