Long-Term Growth in Housing Prices and Stock Returns
Pennsylvania State University - Smeal College of Business
Amy X. Sun
Pennsylvania State University - Department of Accounting
April 28, 2011
A firm’s long-term stock returns are negatively related to past growth in housing prices in the state where the firm is located. The housing price effect is persistent, and robust to controlling for the long-term stock return reversal effect, changes in mortgage interest rates across the states, cyclicality in housing prices, and overall local economic conditions. There is no evidence that extant asset pricing models can adequately explain the effect. The study discusses potential explanations for, and the implications of, the cross-regional housing price effect.
Number of Pages in PDF File: 62
Keywords: Housing prices, Home bias, Stock mispricing, Trading strategy, Economic crisis
JEL Classification: G11, G12, G14, R3working papers series
Date posted: May 6, 2009 ; Last revised: July 14, 2011
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