International Real Estate Review

Increases in stock prices are said to affect house prices due to the wealth effect. Researchers have used aggregate indexes of both house and stock prices from different countries and produced mixed and poor results in support of the wealth effect. Like them, we find long-run support for the wealth effect in six out of 18 OECD countries when we use a linear model. However, when we separate the increases in stock prices from declines and estimate a nonlinear model, a long-run wealth effect is observed in 13 out of 18 OECD countries. Not only are the long-run effects asymmetric in all 13 countries, but so are the short-run effects in all of the countries.