Housing as a Measure for the Long Run Risk in Asset Pricing

University of Chicago and Jose Fillat

No 483, 2008 Meeting Papers from Society for Economic Dynamics

Abstract: I use a non-separable utility function with non-housing consumption and consumption of housing services, which generates an intertemporal composition risk, besides the traditional consumption growth risk. The composition risk has effects for the valuation of cash flow growth fluctuations far into the future due to the persistence of consumption growth and housing services growth. I provide a closed form solution for the valuation function despite the non-separability. This allows me to quantify the price of risk in the long-run with inputs from an indirect inference estimation of the endowment process. I evaluate the different exposure to long-run risk of a cross section of portfolios of securities, and characterize the price of risk for different investment horizons. The model also explains the spread of the returns to different portfolios sorted in book to market and required housing returns, at different investment horizons.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (8)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:red:sed008:483

Access Statistics for this paper

More papers in 2008 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().