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Consumption-Wealth Ratio and Expected Housing Return


  • N. Kundan Kishor

    () (University of Wisconsin-Milwaukee)

  • Swati Kumari

    () (University of Wisconsin-Milwaukee)


In this paper, we estimate expected return on housing by exploiting information from the variations in the consumption- wealth ratio. We combine a present-value model of consumption with an unobserved component model to express the excess consumption-assets ratio (consumption in excess of labor income) as a linear function of unobserved return on housing assets, financial assets, and consumption growth. We apply a Kalman filter to extract expected housing asset returns from the history of realized returns and excess consumption growth. Our results suggest that filtered housing returns do a significantly better job in predicting realized housing returns than other popular predictors.

Suggested Citation

  • N. Kundan Kishor & Swati Kumari, 2014. "Consumption-Wealth Ratio and Expected Housing Return," Journal of Real Estate Research, American Real Estate Society, vol. 36(1), pages 87-108.
  • Handle: RePEc:jre:issued:v:36:n:1:2014:p:87-108

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    1. repec:jre:issued:v:39:n:2:2017:p:263_288 is not listed on IDEAS

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services


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