The dynamic relationship between stock and property markets : a Maltese perspective

Abstract

The Maltese housing market has gained a lot of attention over the past few years. Furthermore, the allocation of financial resources is considered important by investors and households. The main aim of this dissertation is to analyse whether a long-run or short-run relationship exists between the property market indices and the stock market index. This will cover the periods between 2000 and 2020 when amalgamating both property indices. This twenty-year period will be analysed by employing time-series analyses, making use of Autoregressive Distributed Lag (ARDL) models and the Error Correction Model (ECM). The main results find that a longrun relationship exists between the property index issued by the National Statistics Office (NSO) and the Malta Stock Exchange Total Equity Return index (MSETRX). Whereas no relationship was found between the property index issued by the Central Bank of Malta (CBM) and the Malta Stock Exchange Total Equity Return Index (MSETRX). Hence, this study can be further developed by testing other indices that are deemed to be relevant to this study to find new relationships. Also, one can assess the periods before and after the 2008 financial crisis, to analyse how the crisis affected the respective indices being tested.