Conference proceedings article

The nexus between stock market index and apartment and villa prices : Granger causality test of Swedish data

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Subtitle: Granger causality test of Swedish data

Author list: Yazdanfar, Darush;Öhman, Peter

Publication year: 2016

URL: https://www.mah.se/upload/FAKULTETER/KS/Urbana%20Studier/RealEstate/5th_RealEstateWorkshop_Abstracts.pdf


Abstract

Purpose - The purpose of this study is to investigate the Granger causality link between the stockmarket index and housing prices in terms of prices of apartments and prices of villas.

Design/methodology/approach – Monthly data over the period September 2005 to October 2013 ofprices of apartments, prices of villas, stock market index, mortgage rates, and consumer price indexwere used. Statistical methods were applied to explore the long-run equilibrium relationship betweenthe stock market index and the prices of apartments and villas.

Findings - The results indicate that the stock market index and house prices are co-integrated andthat a long-run equilibrium relationship exists between them. However, regarding their relationshipto the stock market index there are significant differences between prices of apartments and prices ofvillas. According to the Granger causality test, there is a unidirectional relationship between thestock market index and prices of apartments, supporting the wealth effect hypothesis. At the sametime, the results indicate a bidirectional Granger causality between the stock market index andprices of villas.

Originality/value - To the authors’ best knowledge, this study represents a first attempt to focus onthe causal nexus between stocks and house prices in terms of apartment and villa prices in theSwedish context using a vector error correction model to analyse monthly data.


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