Growth in Housing Prices and Long-Term Abnormal Stock Returns

Real Estate Economics, Forthcoming

Posted: 22 Feb 2012

See all articles by Henock Louis

Henock Louis

Pennsylvania State University - Smeal College of Business

Amy X. Sun

University of Houston

Date Written: February 21, 2012

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 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

Suggested Citation

Louis, Henock and Sun, Amy X., Growth in Housing Prices and Long-Term Abnormal Stock Returns (February 21, 2012). Real Estate Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2008909

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)

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