Stock Prices, Regional Housing Prices, and Aggregate Technology Shocks

51 Pages Posted: 2 Sep 2015

See all articles by Jiro Yoshida

Jiro Yoshida

Pennsylvania State University - Smeal College of Business; The University of Tokyo - Graduate School of Economics

Date Written: May 22, 2015

Abstract

The correlation between stock and housing prices, which is critical for household asset allocations, varies widely by metropolitan area and country. A general equilibrium model demonstrates that an aggregate positive technology shock increases stock prices and housing demand but can decrease housing prices where land supply is elastic because stable future rents are discounted at higher interest rates. Using panel data of U.S. metropolitan areas and OECD countries, I find that the housing price response to TFP shocks as well as the stock-housing correlation are smaller and even negative where the housing supply is elastic. I also find that household equity investment is positively related to housing supply elasticity.

Keywords: macroeconomic shocks, total factor productivity, general equilibrium, regional heterogeneity, house price, housing supply elasticity, asset allocation

JEL Classification: E32, R21, R31, G11

Suggested Citation

Yoshida, Jiro, Stock Prices, Regional Housing Prices, and Aggregate Technology Shocks (May 22, 2015). Available at SSRN: https://ssrn.com/abstract=2654270 or http://dx.doi.org/10.2139/ssrn.2654270

Jiro Yoshida (Contact Author)

Pennsylvania State University - Smeal College of Business ( email )

368 Business Building
Smeal College of Business
University Park, PA 16802
United States
814-865-0392 (Phone)
814-865-6284 (Fax)

HOME PAGE: http://www.personal.psu.edu/juy18

The University of Tokyo - Graduate School of Economics ( email )

7-3-1 Hongo
Bunkyo-ku, Tokyo 113-0033
Japan
813-5841-5653 (Phone)
813-5841-5521 (Fax)

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