Download or read book The Risk Return Relationship in Housing Markets written by Lu Han and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Standard risk-return tradeoff theory cannot explain why housing return varies with risk positively in some markets but negatively in some other markets. This paper addresses this issue by incorporating two unique features of housing into a standard consumption-based asset pricing model: (1) intertemporal hedging incentives and (2) a kinked housing supply function. The model nests two competing effects of price risk on housing return: a financial risk effect associated with owning risky housing asset, and a consumption insurance effect associated with using the current house to hedge against future housing cost risk. The empirical findings confirm several equilibrium predictions implied by the model. In particular, the variation in housing risk-return relationship across markets is driven by both local households' hedging incentives and housing supply constraints.

Download or read book Housing Risk and Return written by Karl E. Case and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the risk-return relationship in determination of housing asset pricing. In so doing, the paper evaluates behavioral hypotheses advanced by Case and Shiller (1988, 2002, 2009) in studies of boom and post-boom housing markets. The paper specifies and tests a housing asset pricing model (H-CAPM), whereby expected returns of metropolitan-specific housing markets are equated to the market return, as represented by aggregate US house price time-series. We augment the model by examining the impact of additional risk factors including aggregate stock market returns, idiosyncratic risk, momentum, and Metropolitan Statistical Area (MSA) size effects. Further, we test the robustness of H-CAPM results to inclusion of controls for socioeconomic variables commonly represented in the house price literature, including changes in employment, affordability, and foreclosure incidence. Consistent with the traditional CAPM, we find a sizable and statistically significant influence of the market factor on MSA house price returns. Moreover we show thatmarket betas have varied substantially over time. Also, we find the basic housing CAPM results are robust to the inclusion of other explanatory variables, including standard measures of risk and other housing market fundamentals. Additional tests of the validity of the model using the Fama-MacBeth framework offer further strong support of a positive risk and return relationship in housing. Our findings are supportive of the application of a housing investment risk-return framework in explanation of variation in metro-area cross-section and time-series US house price returns. Further, results strongly corroborate Case-Shiller behavioral research indicating the importance of speculative forces in the determination of U.S. housing returns.

Download or read book Real Estate Risk in Equity Returns written by Gaston Michel and published by Springer Science & Business Media. This book was released on 2009-08-03 with total page 182 pages. Available in PDF, EPUB and Kindle. Book excerpt: Gaston Michel investigates whether shocks to real estate markets constitute an important source of the risk that is priced in the cross section of equity returns. His results document that real estate risk explains a large part of the cross-sectional variation in equity returns. He shows that an alternative modeI which includes the real estate factor performs as well as or better than the Fama-French model in pricing equity returns.

Download or read book Risk and Return in the Single Family Housing Market written by Theodore M. Crone and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The tradeoff between risk and return in equity markets is well established. This paper examines the existence of the same tradeoff in the single-family housing market. For home buyers, who constitute about two-thirds of U.S. households, the choice about how much housing and which house to buy is a joint consumption/investment decision. Does this consumption/investment link negate the risk/return tradeoff within the single-family housing market? Theory suggests the link still holds. This paper supplies empirical evidence insupport of that theoretical result. The views expressed here are solely those of the author and do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or of the Federal Reserve System.

Download or read book Risk and Return in Institutional Commercial Real Estate written by Ryan Hunter Jones and published by . This book was released on 2012 with total page 106 pages. Available in PDF, EPUB and Kindle. Book excerpt: Commercial Real Estate is a large asset class, increasingly owned by professional investment managers. Investment managers need a thorough understanding of the risk return relationship and tools to adequate implement sound investing, portfolio management and risk management strategies. Equilibrium asset pricing models are tools that identify and quantify the risk factors priced by the capital market and establish risk adjusted LONG RUN expected returns. This thesis creates portfolios of properties by property type, geographic location and asset size. Total return indices are created for each portfolio to test single factor and multifactor asset pricing models cross sectionally within the commercial real estate asset class. Historical total return data is used from three sources including: NCREIF; the stock market-based FTSE NAREIT Pure-Property Index Series; and a novel "synthetic" total return index created by the researcher from the repeat sale transaction-based Moody's/RCA CPPI Indices. The asset pricing model test results for the NCREIF and PureProperty indices show that a substantial amount of the variation in LONG RUN total return can be explained by a portfolio's beta with respect to a market index and property specific variables such as property type, location and asset size. The asset pricing model test results for the RCA indices were poor and failed to explain the cross-section of commercial real estate returns. Thus, it appears that certain parts of the commercial real estate market may be operating without a systematic relationship of risk and return.

Download or read book Risk and Return within the Single Family Housing Market written by Theodore M. Crone and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The trade-off between risk and return in equity markets is well established. This paper examines the existence of the same trade-off in the single-family housing market. That market is dominated by homeowners, who constitute about two-thirds of U.S. households. For them the choice about how much housing and what house to buy is a joint consumption/investment decision. Furthermore, owner-occupied housing is by nature a lumpy investment whose risk cannot be completely diversified. Does this consumption/investment link negate the risk/return trade-off within the single-family housing market? Theory suggests the link still holds. This paper supplies empirical evidence in support of that theoretical result.

Download or read book Risk return Relationships in Real Estate Sub markets Compared written by and published by . This book was released on 1991 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Evaluation of the Risk return Relationship of Conventional and Sustainable Real Estate Property Investments written by Yongbaek Roh and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Real estate investors frequently encounter problems on decision making of their investment to sustainable buildings. The investment decision is a result of the investor's propensity toward risks (e.g., risk-averse, risk-neutral, or risk-seeking) and the interpretation of the market condition. Thus, assessment of investment risks in financial terms is a critical issue in a decision making. This research aims at the assessment of financial performances of sustainable and conventional real estate investments through the financial asset valuation methodology. The market risks and the associated expected returns were assessed by each statistically categorized market, which is critical for constructing investment portfolios of real estate investors. The backbone of the analytical method of this research is Capital Asset Pricing Model (CAPM) theory. The major elements are risk-free rate of return, associated risk premium and market return that connotes the relationship between systematic risks and the returns. Validations were made through the empirical tests verifying the adaptability of the theory on the target markets, followed by the calculations of financial performances of sustainable and conventional properties, which is an effective and precise indicator for real estate investment decision making. Shown on the results of the analysis, the risks and returns of the U.S. office property market was found to have positive relationship, and the relationship was not simple linear but s-curved. Sustainable properties were undervalued in the market, showing higher returns at given systematic risk than market equilibrium and conventional properties. The risk-return relationship was analyzed by the ranges of beta, due to the characteristics of the U.S. office property market showing different relationships along the amount of the risk. Sustainable portfolios financially performed better in most of the systematic risk ranges; however, it showed poorer performance in beta range from approximately 0.3 to 0.9, due to its higher initial acquisition cost or construction cost combined with low risk-low return relationship. Within the segment of higher systematic risk, the financial performance of sustainable investment portfolio was so dramatically increased that the expected returns of sustainable portfolio showed 38% higher risk premium coefficient than conventional portfolio returns.

Download or read book Evaluation of the Risk return Relationship of Conventional and Sustainable Real Estate Property Investments written by and published by . This book was released on 2016 with total page 238 pages. Available in PDF, EPUB and Kindle. Book excerpt: Real estate investors frequently encounter problems on decision making of their investment to sustainable buildings. The investment decision is a result of the investor’s propensity toward risks (e.g., risk-averse, risk-neutral, or risk-seeking) and the interpretation of the market condition. Thus, assessment of investment risks in financial terms is a critical issue in a decision making. This research aims at the assessment of financial performances of sustainable and conventional real estate investments through the financial asset valuation methodology. The market risks and the associated expected returns were assessed by each statistically categorized market, which is critical for constructing investment portfolios of real estate investors. The backbone of the analytical method of this research is Capital Asset Pricing Model (CAPM) theory. The major elements are risk-free rate of return, associated risk premium and market return that connotes the relationship between systematic risks and the returns. Validations were made through the empirical tests verifying the adaptability of the theory on the target markets, followed by the calculations of financial performances of sustainable and conventional properties, which is an effective and precise indicator for real estate investment decision making. Shown on the results of the analysis, the risks and returns of the U.S. office property market was found to have positive relationship, and the relationship was not simple linear but s-curved. Sustainable properties were undervalued in the market, showing higher returns at given systematic risk than market equilibrium and conventional properties. The risk-return relationship was analyzed by the ranges of beta, due to the characteristics of the U.S. office property market showing different relationships along the amount of the risk. Sustainable portfolios financially performed better in most of the systematic risk ranges; however, it showed poorer performance in beta range from approximately 0.3 to 0.9, due to its higher initial acquisition cost or construction cost combined with low risk-low return relationship. Within the segment of higher systematic risk, the financial performance of sustainable investment portfolio was so dramatically increased that the expected returns of sustainable portfolio showed 38% higher risk premium coefficient than conventional portfolio returns.

Download or read book Risk and Return in the U S Housing Market written by Susanne E. Cannon and published by . This book was released on 2011 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper carries out an asset-pricing analysis of the U.S. metropolitan housing market. We use zip code level housing data to study the cross-sectional role of volatility, price level, stock market risk and idiosyncratic volatility in explaining housing returns. While the related literature tends to focus on the dynamic role of volatility and housing returns within submarkets over time, our risk-return analysis is cross-sectional and covers the national U.S. metropolitan housing market. The study provides a number of important findings on the asset-pricing features of the U.S. housing market. Specifically, we find i) a positive relation between housing returns and volatility with returns rising by 2.48% annually for a 10% rise in volatility, ii) a positive but diminishing price effect on returns, iii) that stock market risk is priced directionally in the housing market and iv) idiosyncratic volatility is priced in housing returns. Our results on the return-volatility-price relation are robust to i) MSA (metropolitan statistical area) clustering effects and ii) differences in socioeconomic characteristics among submarkets related to income, employment rate, managerial employment, owner occupied housing, gross rent and population density.

Download or read book Risk and Return Within the Single family Housing Market written by Theodore M. Crone and published by . This book was released on 1998 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the existence of the same trade-off in the single-family housing market. That market is dominated by homeowners, who constitute about two-thirds of U.S. households. For them the choice about how much housing and what house to buy is a joint consumption/investment decision. Furthermore, owner-occupied housing is by nature a lumpy investment whose risk cannot be completely diversified. Does this consumption/investment link negate the risk/return trade-off within the single-family housing market? Theory suggests the link still holds. This paper supplies empirical evidence in support of that theoretical result. support of that theoretical result.

Download or read book Risk and Return in the Single family Housing Market written by Theodore M. Crone and published by . This book was released on 1996 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Relationships Between Real Estate Price and Expected Financial Asset Risk and Return written by Gang-Zhi Fan and published by . This book was released on 2017 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: In pricing real estate with indifference pricing approach, market incompleteness significantly distorts the conventional pricing relationships between real estate and financial asset. In this paper, we focus on the pricing implication of market comovement because comovement tends to be stronger in financial crisis when investors are especially sensitive to price declines. We find that real estate price increases with expected financial asset return but only in weak market comovement (i.e., a normal market environment) when investors enjoy diversification benefit. When market comovement is strong, real estate price strictly declines with expected financial asset return. More importantly, contrary to the conventional positive relationship, real estate price generally declines with expected financial asset risk. Even when market comovement is strong, real estate price only increases with financial asset risk when the risk is low but eventually declines with the risk when it becomes high. These nonlinear price relationships highlight the importance of asset market comovement that is usually overlooked by conventional option pricing model developed in complete market setting.

Download or read book Do Different Price Points Exhibit Different Investment Risk and Return Commercial Real Estate written by David Geltner and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Conventional real estate price indices provide a single measure for the path of asset prices over time (controlling for the quality of the representative or average property). But it could be that properties have different price dynamics based on the price segment they are traded in. On the demand side, investors at different price points are differentiated by the amount of capital the investor has at their disposal and the type and source of financing. Smaller, private investors cluster at lower price points, while large institutions dominate the high price points. On the supply side, properties at different price points may serve different space markets with different types of tenants, and may reflect different supply elasticity and land/structure value ratios. This paper uses an unconventional approach, quantile regression, to estimate price indices for different price segments in commercial real estate. Our results show that there are indeed large differences in price dynamics for different price points. These differences are suggestive of a lack of integration in the property asset market, because we find apparent differences in the risk/return relationship. Lower price point properties exhibit less risk (in the form of volatility and cycle amplitude), but without evidence of lower total returns. Lower price point properties also show greater momentum and hence, predictability.

Download or read book Household Debt and House Prices at risk A Tale of Two Countries written by Mr.Adrian Alter and published by International Monetary Fund. This book was released on 2020-02-28 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: To identify and quantify downside risks to housing markets, we apply the house price-at-risk methodology to a sample of 37 cities across the United States and Canada using quarterly data from 1983 to 2018. This paper finds that downside risks to housing markets in the United States have seemingly fallen over the past decade, while having increased in Canada. Supply-side drivers, valuation, household debt, and financial conditions jointly play a key role in forecasting house price risks. In addition, capital flows are found to be significantly associated with future downside risks to major housing markets, but the net effect depends on the type of flows and varies across cities and forecast horizons. Using micro-level data, we identify households vulnerable to potential housing shocks and assess the riskiness of household debt.

Download or read book Interaction of Housing Market and Stock Market in the U S A Markov Switching Approach written by Ming Chu Chiang and published by . This book was released on 2019 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses the Markov Switching VAR model to examine the dynamics relationships between stock returns and housing returns in the US covering the periods from 1987 to 2017. The results show significant regime-dependent auto-correlations in stock and housing returns in both the high volatility and the low volatility regimes. The feedback effects are stronger in than housing markets than the stock markets. We observe significant positive cross-market spillovers, which are consistent with the wealth story. Increases in stock return in the low volatility regime create positive spillover effects into housing markets; and likewise, the positive spillovers in the reverse direction from housing market to the stock market occur in the high volatility regime. We also find significant negative correlations between the lagged stock returns and the current housing returns in the high volatility regime, which imply that capital switching occur where investors move their investments out of the housing market into the stock market.

Download or read book Econometric Analyses of International Housing Markets written by Rita Yi Man Li and published by Routledge. This book was released on 2016-03-31 with total page 199 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book explores how econometric modelling can be used to provide valuable insight into international housing markets. Initially describing the role of econometrics modelling in real estate market research and how it has developed in recent years, the book goes on to compare and contrast the impact of various macroeconomic factors on developed and developing housing markets. Explaining the similarities and differences in the impact of financial crises on housing markets around the world, the author's econometric analysis of housing markets across the world provides a broad and nuanced perspective on the impact of both international financial markets and local macro economy on housing markets. With discussion of countries such as China, Germany, UK, US and South Africa, the lessons learned will be of interest to scholars of Real Estate economics around the world.