Uncovering the interrelationship between the U.S. stock and housing markets: a bootstrap rolling window Granger causality approach

ABSTRACT

The purpose of this study is to investigate the time-varying interrelationship between the housing market and the stock market in the U.S. during the period of 1890–2013, by employing a rolling window subsample with a bootstrap Granger causality test. The rolling window allows for structural changes in the economy over time. Whereas previous studies have not identified a causal relationship between the U.S. housing price index and the SP500 stock price index, this new analysis is the first to identify certain periods wherein either the wealth effect or the investment effect can be observed.

KEYWORDS:

• Housing market
• stock market
• rolling window
• bootstrap Granger nonlinear causality test

JEL CLASSIFICATION:

• C32
• C53
• G15

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Details about this low interest rate periods, please refer to Kiley and Roberts (2017).