We develop a model in which investors can participate in stock, bond and housing markets. Investors’ market entry decisions are subject to herding effects and depend on the markets’ price trends and on their mispricings. The dynamics of our model is governed by a four-dimensional nonlinear map and its unique inner steady state is characterized by standard present-value relations between dividends, rents and the bond rate. Amongst other things, we show that endogenous stock and housing market dynamics emerge, countercyclical to each other, if investors react strongly to the markets’ price trends. Such a cross feedback reflects investors’ tendency to transfer their enthusiasm from one speculative market to another.

Dieci, R., Schmitt, N., Westerhoff, F. (2018). Interactions between stock, bond and housing markets. JOURNAL OF ECONOMIC DYNAMICS & CONTROL, 91, 43-70 [10.1016/j.jedc.2018.05.001].

Interactions between stock, bond and housing markets

Dieci, Roberto
;
2018

Abstract

We develop a model in which investors can participate in stock, bond and housing markets. Investors’ market entry decisions are subject to herding effects and depend on the markets’ price trends and on their mispricings. The dynamics of our model is governed by a four-dimensional nonlinear map and its unique inner steady state is characterized by standard present-value relations between dividends, rents and the bond rate. Amongst other things, we show that endogenous stock and housing market dynamics emerge, countercyclical to each other, if investors react strongly to the markets’ price trends. Such a cross feedback reflects investors’ tendency to transfer their enthusiasm from one speculative market to another.
2018
Dieci, R., Schmitt, N., Westerhoff, F. (2018). Interactions between stock, bond and housing markets. JOURNAL OF ECONOMIC DYNAMICS & CONTROL, 91, 43-70 [10.1016/j.jedc.2018.05.001].
Dieci, Roberto*; Schmitt, Noemi; Westerhoff, Frank
File in questo prodotto:
File Dimensione Formato  
1010358618.pdf

accesso aperto

Tipo: Postprint
Licenza: Licenza per Accesso Aperto. Creative Commons Attribuzione - Non commerciale - Non opere derivate (CCBYNCND)
Dimensione 656.65 kB
Formato Adobe PDF
656.65 kB Adobe PDF Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/671629
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 22
  • ???jsp.display-item.citation.isi??? 20
social impact