Do Real Estate Prices and Stock Prices Move Together? An International Analysis

Posted: 11 Dec 1998

See all articles by Daniel C. Quan

Daniel C. Quan

Cornell University - School of Hotel Administration

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Abstract

The relationship between stock prices and real estate prices has been the subject of substantial debate in both the academic and practitioner literatures. Existing studies have focused on the time-series of stock and real estate returns using data from a single country, like the US. By necessity, these studies examine return and price changes over short intervals, creating a bias when property values are smoothed from year to year. Using data from 17 countries over 14 years, this paper examines the relation between stock returns and changes in property values and rents. Consistent with other country-specific studies, we find that, with the exception of Japan, the contemporaneous relation between yearly real estate price changes and stock returns is not statistically significant. However, when the data are pooled across countries and when we look at longer measurment intervals, a significant relation between stock returns and both rents and value changes becomes apparent. Real estate prices are also found to be significantly influenced by GDP growth rates and provide a good long-run hedge against inflation but a poor year-to-year hedge.

JEL Classification: F3

Suggested Citation

Quan, Daniel C. and Titman, Sheridan, Do Real Estate Prices and Stock Prices Move Together? An International Analysis. Real Estate Economics. Available at SSRN: https://ssrn.com/abstract=140444

Daniel C. Quan (Contact Author)

Cornell University - School of Hotel Administration ( email )

436 Statler Hall
Cornell University
Ithaca, NY 14853-6902
United States
607-255-6404 (Phone)
607-255-1277 (Fax)

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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