Is housing risk priced in stock market? Empirical evidence from China

This paper examines the pricing of housing risk in Chinese stock market. Traditional asset pricing theory indicates a positive housing risk premium, while we find exactly the opposite is true. Stocks with higher housing “beta” earn significantly lower returns. This effect cannot be explained by popular pricing factors and is robust under different housing market indices. We propose that this effect is caused by the indirect speculation of housing in stock market. Consistent with this hypothesis, we find that stocks with high housing beta can serve as potential vehicles to track housing market index. Moreover, the negative premium is more pronounced in stocks with high idiosyncratic skewness and investor attention