Intertemporal Risk-Return Relationship in Housing Markets

Pin-Te Lin

Journal of Real Estate Research, 2021, vol. 44, issue 3, 331-354

Abstract: We empirically investigate the intertemporal risk-return relationship in the U.S. housing market. Consistent with the theoretical predictions in Merton’s (1973) intertemporal capital asset pricing model (ICAPM), the national (regional) housing market displays a significantly positive relationship between its conditional variance (covariance) and capital gains. Results provide empirical support for housing showing that risk-averse agents require higher returns to reward higher risk in an intertemporal framework.

Date: 2021
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DOI: 10.1080/08965803.2021.2011560

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