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Risk and Return within the Single‐Family Housing Market

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  • Theodore M. Crone
  • Richard P. Voith

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.

Suggested Citation

  • Theodore M. Crone & Richard P. Voith, 1999. "Risk and Return within the Single‐Family Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(1), pages 63-78, March.
    • Handle: RePEc:bla:reesec:v:27:y:1999:i:1:p:63-78
    DOI: 10.1111/1540-6229.00766
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    Cited by:

    1. Tracey West & Andrew C. Worthington, 2003. "Macroeconomic risk factors in Australian commercial real estate, listed property trust and property sector stock returns: A comparative analysis using GARCH-M," School of Economics and Finance Discussion Papers and Working Papers Series 160, School of Economics and Finance, Queensland University of Technology.
    2. William Goetzmann & Matthew Spiegel, 2000. "The Policy Implications of Portfolio Choice in Underserved Mortgage Markets," Yale School of Management Working Papers ysm161, Yale School of Management, revised 01 Mar 2001.
    3. William Goetzmann & Matthew Spiegel, 2000. "The Policy Implications of Portfolio Choice in Underserved Mortgage Markets," Yale School of Management Working Papers ysm161, Yale School of Management, revised 01 Mar 2001.

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