Wavelet Coherency Analysis of Stock Market Volatility and Housing costs: Insights from International Financial Hubs

This research studies the dynamic aspects of housing prices in the metropolises that are categorized by a significant degree of globalization. The degree of causality and co-movement between the macroeconomic uncertainty, stock, and housing market is assessed using the wavelet coherency technique. Moreover, the volatility spillover’s existence throughout the market of housing is examined in the domain of time-frequency by employing a recent technique that includes merging a time-varying parameter vector autoregression approach with wavelet decomposition. The findings indicate that the international business grouping in a restricted metropolis number that serves as “international hubs” abandons the domestic housing markets vulnerable to volatility spillover and global shocks. The empirical assessment proposed that the association between the stock market and real estate on the one side and ambiguity and real estate on the other side exaggerates throughout the time of disturbance. The co-movement and causality association turn up generally in the long and medium run periods. The indication imparted in the research proposes that policymakers cannot disregard the probability that global shocks to housing markets may influence the local markets. From this perspective, tools of macroprudential regulation may target dwindling off the accidental influence of housing market internationalization, for instance, the synchronization of housing price shock, specifically when these shocks arise in the cities that are also significant financial hubs.