Idiosyncratic Risk in Housing Markets

• 成果类型: Article
• 署名作者: Giacoletti, Marco
• 署名单位: University of Southern California
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhab033
• 发表日期: 2021
• 页码: 3695
• 关键词: real-estate; seller behavior; loss aversion; consumption; equity; price; substitution; returns; search; MODEL

摘要

This paper studies the idiosyncratic risk component of individual house capital gains using data on resales and intermediate capital investments. The idiosyncratic component is large; its dynamics do not follow a random walk; and its magnitude is associated with proxies of information quality and market liquidity at the level of individual properties. Accounting for idiosyncratic risk substantially changes the assessment of the risk-return trade-off for housing: it reduces Sharpe ratios and makes them holding period dependent. I use a simple quantitative portfolio model to show that homeowners may be willing to make significant payments to insure against idiosyncratic housing risk.