Housing Services and Volatility Bounds with Real Estate Returns

Michal Pakoš and Petr Zemcik

ERES from European Real Estate Society (ERES)

Abstract: We investigate the role of a real estate market in consumption based asset pricing models. A long-standing issue in this context is the inability of these models to match the equity premium observed in the data. Piazzesi, Schneider, and Tuzel (2007) use a model with housing services that comes closer to matching the premium. We look at the performance of this model from a different perspective. Rather than focusing on the model implied returns, we use historical returns to construct the Hansen-Jagannathan volatility bounds for the inter-temporal rate of substitution (a stochastic discount factor). Our returns include real estate returns in addition to the typically included returns on stocks and a risk-free asset. Then we calculate moments of a stochastic discount factor implied by the model from Piazzesi, Schneider, and Tuzel (2007). These moments are shown to be above the Hansen-Jagannathan volatility bounds.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2011-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://eres.architexturez.net/doc/oai-eres-id-eres2011-84 (text/html)
https://eres.architexturez.net/system/files/pdf/eres2011_84.content.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2011_84

Access Statistics for this paper

More papers in ERES from European Real Estate Society (ERES) Contact information at EDIRC.
Bibliographic data for series maintained by Architexturez Imprints ().