Long-Run Stock Price-House Price Relation: Evidence from an ESTR Model

10 Pages Posted: 22 Aug 2011  

David G. McMillan

University of Stirling

Date Written: August 22, 2011

Abstract

The direction of any long-run relationship between stock prices and house prices provides useful information for policy makers and practitioners regarding the presence of wealth and credit effects. Using quarterly data from the UK and US this paper reports evidence of non-linear dynamics in the adjustment to equilibrium. Specifically, the equilibrium-deviation must become large before stock prices revert. However, there is no evidence that house price adjust to any disequilbrium. This supports a credit effect on stock prices.

Keywords: House Prices, Stock Prices, ESTR Model, Credit Effect

JEL Classification: C22, G12

Suggested Citation

McMillan, David G., Long-Run Stock Price-House Price Relation: Evidence from an ESTR Model (August 22, 2011). Available at SSRN: https://ssrn.com/abstract=1914424 or http://dx.doi.org/10.2139/ssrn.1914424

David G. McMillan (Contact Author)

University of Stirling ( email )

Stirling, Scotland FK9 4LA
United Kingdom

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