The Causal Relationship between Real Estate and Stock Markets

Posted: 9 Mar 2001

See all articles by John Okunev

John Okunev

Bond University Business School

Patrick J. Wilson

University of Technology Sydney (UTS) - School of Finance and Economics

Ralf Zurbruegg

University of Adelaide; Financial Research Network (FIRN)

Abstract

This paper examines the dynamic relationship that exists between the US real estate and S&P 500 stock markets between the years of 1972 to 1998. This is achieved by conducting both linear and nonlinear casuality tests. The results from these tests provide a number of interesting observations which primarily show linear relationships to be spuriously affected by structural shifts which are inherent within the data. Linear test results generally show a uni-directional relationship to exist from the real estate market to the stock market. However, these results are not consistent with financial theory and for all sub-samples of the data. In contrast, the nonlinear causality test shows a strong unidirectional relationship running from the stock market to the real estate market, and is consistent in the presence of any structural breaks.

Suggested Citation

Okunev, John and Wilson, Patrick J. and Zurbruegg, Ralf, The Causal Relationship between Real Estate and Stock Markets. Available at SSRN: https://ssrn.com/abstract=254700

John Okunev (Contact Author)

Bond University Business School ( email )

Gold Coast
Australia

Patrick J. Wilson

University of Technology Sydney (UTS) - School of Finance and Economics ( email )

Haymarket
Sydney, NSW 2007
Australia
61 2 9514 7777 (Phone)
61 2 9514 7711 (Fax)

Ralf Zurbruegg

University of Adelaide ( email )

233 North Terrace
Department of Finance
Adelaide SA 5005
Australia
+61 8 8303 5535 (Phone)
+61 8 8303 4368 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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