Bank stock prices, Housing Price correlation ?

[jacksmith]

Hi,

What do you think the bank stock price vs. housing price ?

Is there any correlations ? The following is my guess:

$B(t) = const * ($H(t + T) - H0))

$B(t) is the average bank stock price at time t,
$H(t + T) is the average housing price at time t + T, where T represents forward looking fact. For example, T can be half year or a year.

H0 is an constant, to represent the average housing price in the past. For example, H0 can be the average housing price of 2002.

What do you think about this model ?

 

[circadian]

Quote from jacksmith:

Hi,

What do you think the bank stock price vs. housing price ?

Is there any correlations ? The following is my guess:

$B(t) = const * ($H(t + T) - H0))

$B(t) is the average bank stock price at time t,
$H(t + T) is the average housing price at time t + T, where T represents forward looking fact. For example, T can be half year or a year.

H0 is an constant, to represent the average housing price in the past. For example, H0 can be the average housing price of 2002.

What do you think about this model ?

There's only one way to find out, run some real data through it, and see what pops up. If you want an easier way to find correlations of Housing prices and Bank Stocks, just run some regression and correlation analysis on regional housing index futures and the BKX. Bada-Bing!

 

[Daal]

There is clearly a correlation. But since one data input(bank stocks) tries to predict the other I wouldn't pay too much attention to an exact figure

 

[Bolimomo]

Quote from jacksmith:
What do you think about this model ? [/B]

For a minute I thought you were just cracking a joke.

But if you are serious... This is a ridiculously simple linear equation. Besides, what does it mean "average bank stock price". What does it mean "average housing price"?

Those two components are ridiculous enough.


The market is full of highly educated mathematicians who model security prices based on sophisticated mathematical models and trade them. Long Term Capital Management... caused the 1998 market crash. The quants who came up with the risk assessment on the CDOs... caused the banking crisis in 2008.