Journal
INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS
Volume 89, Issue -, Pages -Publisher
ELSEVIER SCIENCE INC
DOI: 10.1016/j.irfa.2023.102765
Keywords
US housing market; Leading indicators; Risk management; ESG investing; House prices; Sentiment indicators
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We argue that financial risk managers should focus on developing forward-looking early warning indicator systems for the North American real estate market. Using time series data from the US housing market, we discuss possible information that such systems could be based on and analyze the relation between US housing starts and the Architectural Billings Index. Our findings provide evidence for a lead-lag relationship and have implications for financial risk managers and ESG investors.
We argue that financial risk managers should focus more strongly on developing forward-looking early warning indicator systems for the North American real estate market. Based on time series data from the US housing market that focuses on the subprime crisis and the period directly after this event, we discuss possible information that such early warning indicator systems could be based on and analyze the presence of a lead-lag relationship between US housing starts and the Architectural Billings Index. We find evidence for such a relation using two different approaches, namely Granger causality tests and transfer entropy analyses. We then discuss the implications of our findings for financial risk managers as well as for ESG investors.
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