Long- and Short-Run Relationships between House and Stock Prices in South Africa: A Nonparametric Approach

Goodness Aye (), Mehmet Balcilar and Rangan Gupta
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Goodness Aye: Department of Agricultural Economics, University of Agriculture, Makurdi, Nigeria

No 201136, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper provides empirical evidence on the long- and short-run relationships between real house and stock prices of South Africa. Standard linear tests may not detect the existence of long- and short-run relationships between time series especially in the presence of structural shifts or regime changes, which, in turn, may cause nonlinearities in the observed series. Thus, in this study, both linear and nonparametric cointegration and Granger Causality tests were conducted utilizing a monthly data set over 1966:01 and 2011:06. Results from the linear cointegration test showed no long-run relationship between house and stock prices. At the same time, the linear Granger causality test produced no evidence of causality running in any or both directions either. In contrast, the nonparametric cointegration test showed the existence of a long-run one-to-one relationship between the two series, with the nonparametric Granger causality test, in addition, indicating a bi-directional causality.

Keywords: House prices; stock prices; causality; nonlinearity; South Africa (search for similar items in EconPapers)
JEL-codes: C22 E44 R31 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2011-12
New Economics Papers: this item is included in nep-afr
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Citations: View citations in EconPapers (13)

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Journal Article: Long- and Short-Run Relationships between House and Stock Prices in South Africa: A Nonparametric Approach (2013)
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