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Long-Term Growth in Housing Prices and Stock ReturnsHenock LouisPennsylvania State University - Smeal College of Business Amy X. SunPennsylvania State University - Department of Accounting April 28, 2011 Abstract: 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, R3 working papers seriesDate posted: May 6, 2009 ; Last revised: July 14, 2011Suggested CitationContact Information
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