Long-Term Growth in Housing Prices and Stock Returns

62 Pages Posted: 6 May 2009 Last revised: 14 Jul 2011

See all articles by Henock Louis

Henock Louis

Pennsylvania State University - Smeal College of Business

Amy X. Sun

University of Houston

Multiple version iconThere are 3 versions of this paper

Date Written: 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.

Keywords: Housing prices, Home bias, Stock mispricing, Trading strategy, Economic crisis

JEL Classification: G11, G12, G14, R3

Suggested Citation

Louis, Henock and Sun, Amy X., Long-Term Growth in Housing Prices and Stock Returns (April 28, 2011). Available at SSRN: https://ssrn.com/abstract=1398443 or http://dx.doi.org/10.2139/ssrn.1398443

Henock Louis (Contact Author)

Pennsylvania State University - Smeal College of Business ( email )

University Park, PA 16802-3306
United States
814-865-4160 (Phone)
814-863-8393 (Fax)

Amy X. Sun

University of Houston ( email )

Bauer College of Business
334 Melcher Hall, 390H
Houston, TX 77204
United States
7137435682 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
305
Abstract Views
1,415
rank
99,701
PlumX Metrics