This study applies wavelet analysis to examine the relationship between the U.S. housing and
stockmarkets over the period 1890–2012.Wavelet analysis allows the simultaneous examination
of co-movement and causality between the two markets in both the time and frequency domains.
Our findings provide robust evidence that co-movement and causality vary across frequencies and
evolve over time. Examining market co-movement in the time domain, the two markets exhibit
positive co-movement over recent decades, except for 1998–2002 when a high negative comovement
emerged. In the frequency domain, the two markets correlate with each othermainly
at low frequencies (longer term), except in the second half of the 1900s as well as in 1998–2002,
when the two markets correlate at high frequencies (shorter term). In addition, we find that the
causal effects between the markets in the frequency domain occur generally at low frequencies
(longer term). In the time-domain, the time-varying nature of long-run causalities implies
structural changes in the two markets. These findings provide a more complete picture of the
relationship between the U.S. real estate and stock markets over time and frequency, offering
important implications for policymakers (and practitioners).