Dynamic Correlation and Volatility between the Capital Market and Housing Sector

The housing sector and capital market are known as the main investment options in each country that they have been recently taken into consideration as a focal point for legislative institutions and economic policy makers (particularly, since the start of financial crisis). This paper examines dynamic conditional correlation and volatility transmission between the housing sector and capital market from 2005 to 2016 through using four Multivariate GARCH Models.
The survey revealed the volatility transmission between the housing sector and capital market on various levels. Also, results of the study imply a positive cross-sectional correlation between two markets in the long run in spite of negative impacts of housing sector shocks on the capital market in the short run. The issue can be played a major role in explaining the exact movement between two markets with a view to understanding investment flows in Iranian society as well as considering systemic dimensions of volatility in the housing sector. This article offers to establish a financial stability and development committee (on financial-mortgage products) to oversee a severe and escalating financial crisis as well as assist with de-escalating a situation