The relationship between stock and housing prices: evidence from emerging Asian economies (2001–2024)

Abstract

This study examines the bidirectional wealth transmission between housing and stock markets in three Emerging Asian economies namely China, Thailand, and Indonesia over the period 2001 to 2024. Drawing on the wealth effect hypothesis, the collateral channel, and the participation wave framework, the study investigates whether housing price appreciation drives stock market returns and whether stock market booms redirect capital into the housing sector. The homeownership rate and stock ownership rate are introduced as country-level moderators to capture how the breadth of market participation shapes the intensity of wealth spillovers. The empirical analysis employs panel fixed effects estimation, pooled OLS, and seemingly unrelated regression to exploit both cross-country and within-country variation. The central finding is a null result. At the annual country-aggregate level, neither housing returns nor stock returns are statistically detectable predictors of one another, and the moderating roles of ownership rates in those transmissions are indistinguishable from zero. This outcome does not contradict urban household-level evidence from China or long-run evidence from advanced economies; rather, it suggests that classical wealth and collateral transmission mechanisms do not aggregate cleanly to annual national signals in these settings, likely due to limited mortgage infrastructure, high data aggregation, and short panel length. A secondary, tentative pattern emerges in which broader stock market participation is negatively associated with subsequent housing returns, broadly consistent with portfolio asset substitution. This finding is marginal in statistical significance and rests on partly-interpolated ownership data, and is therefore flagged as a hypothesis for future research rather than an established channel. Across multiple specifications, the interest rate emerges as the most reliably significant determinant of both asset markets, affirming monetary policy as a meaningful lever for cross-market stability in the region.