Can Housing Risk Be Diversified? A Cautionary Tale from the Housing Boom and Bust

• 成果类型: Article
• 署名作者: Cotter, John; Gabriel, Stuart; Roll, Richard
• 署名单位: University College Dublin; University of California System; University of California Los Angeles; California Institute of Technology
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhu085
• 发表日期: 2015
• 页码: 913
• 关键词: real-estate; market integration; financial-markets; STOCK; returns; volatility

摘要

This study evaluates the effectiveness of geographic diversification in reducing housing investment risk. To characterize diversification potential, we estimate spatial correlation and integration among 401 U.S. metropolitan housing markets. The 2000s boom brought a marked uptrend in housing market integration associated with eased residential lending standards and rapid growth in private mortgage securitization. As boom turned to bust, other macroeconomic factors, including employment and income fundamentals, importantly contributed to the trending up in housing return integration. Portfolio simulations reveal substantially lower diversification potential and higher risk in the wake of increased market integration.