Centennial Honors College
Western Illinois University
Undergraduate Research Day 2012
Poster Presentation
The Correlation of U.S. Residential House Prices and Home Builder ETF’s
Robert Tupper
Faculty Mentor: Don T. Johnson
Finance
I am conducting an analysis of the correlation of United States residential house prices
and Home builder ETF’s. The goal of this study is to show the correlation by use of
statistical models. By proving this correlation, I can provide investors with an alternative
option for purchasing individual homes. Instead, investors could purchase home builder
ETF’s as a way to invest in the housing market. The correlation will be accomplished by
using regression. Further, I believe the need for a lag variable will be important. These
models will be provided with the study. The goal is to provide highest possible
correlation.
The ETF I plan to use in this study is the iShares Dow Jones U.S. Real Estate ETF
(IYR). This home builder ETF will be used because it has been publicly traded for 12
years and should have a good correlation with the U.S. residential housing market.
These figures were found on yahoo finance and will be used in the models on a monthly
basis. The U.S. residential house price index found on freddiemac.com will be used for
the dependent variable.
There are at least two articles that I will be discussing along with my study. These two
articles are regarding the same topic as the study that I am doing. The articles both
come from the American Real Estate Economics journal. The first article is written by
Joseph Gyourko and Donald Keim. The second article is written by Diery Seck. These
studies have shown there is some correlation between U.S. residential housing prices
and home builder stock prices.