Wealth effect, credit price effect, and the inter-relationships between Hong Kong's property market and stock market

Chi Man Hui, Ivan M.H. Ng

Research output: Journal article publicationJournal articleAcademic researchpeer-review

14 Citations (Scopus)

Abstract

Purpose: This paper aims to test the short- and long-run interrelationships between Hong Kong's residential property market and stock market, as well as market fundamentals and China-related factors, between 1990 and 2006. Design/methodology/approach: The authors observed changes in the relationship between property prices and stock indexes by using Granger causality test, variance decomposition and CUSUM test. In contrast to some other studies, they have, at the same time, identified the break point(s) and variation of relation. Findings: The findings reveal that the correlation between residential property price and stock index had become weaker over time, even though the trend of residential property price is similar to that of stock index during the sample period. Under such circumstances, it is more likely for investors to reap more benefits through portfolio diversifications. Research limitations/implications: The credit price effect from the property market to the stock market, as observed between 1990 and 1994, has been replaced by a snowball effect within each of these two markets. In addition, stocks have become a hedge against inflation in the short-run, while both stocks and real estate investments are utilized as such in the long-run after 1995. Lastly, it appears that there are signs of interdependence between Hong Kong's stock market and the Chinese economy, whereas contagion might occur between China's economy and Hong Kong's property market. Originality/value: The paper proffers some insights with regard to both real estate and stocks as investment options, and how closer integration between two regions (or nations) shape the interactions between various markets between them.
Original languageEnglish
Pages (from-to)255-273
Number of pages19
JournalProperty Management
Volume30
Issue number3
DOIs
Publication statusPublished - 1 Jun 2012

Keywords

  • China
  • CUSUM of squares test
  • Granger causality
  • Property marketing
  • Stock markets
  • Structural break
  • Variance decomposition

ASJC Scopus subject areas

  • Tourism, Leisure and Hospitality Management

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