Growth in Housing Prices and Long-Term Abnormal Stock Returns
Real Estate Economics, Forthcoming
Posted: 22 Feb 2012
Date Written: February 21, 2012
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 over time and robust to controlling for common risk factors, the long-term stock return reversal effect, changes in mortgage interest rates across the states, cyclicality in housing prices, and overall local economic conditions. 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
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