Abstract/Summary

This research investigates the dynamic relationship between housing and stock markets across nine countries. Using total return indices from 1870 to 2015, empirical results around the globe consistently show that stock and housing markets are linearly segmented, with fractional integration found in Denmark and the US. A positive lead-lag relationship from stock to housing is observed for most countries, offering support for the wealth effect theory. The results have important implications for portfolio diversification strategy and government policy.