Price-volume Correlation in the Housing Market: Causality and Co-movements (P.16)

appears to indicate a shift of the supply curve to the right side (a decrease in sellers’
asking prices). This finding seems consistent with Stein (1995) etc: the more
financial wealth a household has (possibly due to higher stock prices), the less likely
the household is financially constrained and thus it sets a lower ask price. Second,
home prices are significantly higher and trading volume is (insignificantly) lower
when the stock market shows an uptrend. It is premature to make any conclusions
regarding the economic mechanism; however, we conjecture that private valuations
of homeowners may be affected by their expectation of the economy in the future. A
booming stock market may create higher housing demand in the future, and
homeowners may adjust their private valuation upward accordingly, which may shift
the supply curve upward. We leave the exploration of this possibility for future

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