Risk and return within the single-family housing market

Theodore M. Crone and Richard Voith

No 98-4, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: 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.

Keywords: Housing (search for similar items in EconPapers)
Date: 1998
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Journal Article: Risk and Return within the Single‐Family Housing Market (1999)
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