Hedging Housing Risk in London
This paper investigates the benefits of allowing households to compensate the portfolio distortion due to their housing consumption through investments in housing price derivatives. Focusing on the London market, we show that a major loss from over-investment in housing is that households are forced to hold a very risky portfolio. However, the strong performance of the London housing market means that little is lost in terms of expected returns. Even households with limited wealth are better off owning their home rather than renting and investing in financial assets, as long as they are willing to face the financial risk involved. In this context, access to housing price derivatives would benefit most poor homeowners looking to limit their risk exposure. It would also benefit wealthier investors looking for the high returns provided by housing investments without the costs of direct ownership of properties. Comparisons with French, Swedish and U.S. data provide a broader perspective on our findings. Copyright 2003 by Kluwer Academic Publishers
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 27 (2003)
Issue (Month): 2 (September)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/regional+science/journal/11146/PS2|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Campbell, John & Viceira, Luis, 1999.
"Consumption and Portfolio Decisions When Expected Returns are Time Varying,"
3163266, Harvard University Department of Economics.
- John Y. Campbell & Luis M. Viceira, 1999. "Consumption and Portfolio Decisions when Expected Returns are Time Varying," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 433-495.
- John Y. Campbell & Luis M. Viceira, 1998. "Consumption and Portfolio Decisions When Expected Returns Are Time Varying," Harvard Institute of Economic Research Working Papers 1835, Harvard - Institute of Economic Research.
- John Y. Campbell & Luis M. Viceira, 1996. "Consumption and Portfolio Decisions When Expected Returns are Time Varying," NBER Working Papers 5857, National Bureau of Economic Research, Inc.
- Ortalo-Magne, Francois & Rady, Sven, 2002. "Tenure choice and the riskiness of non-housing consumption," Journal of Housing Economics, Elsevier, vol. 11(3), pages 266-279, September.
- Englund, Peter & Quigley, John M. & Redfearn, Christian L., 1998. "Improved Price Indexes for Real Estate: Measuring the Course of Swedish Housing Prices," Journal of Urban Economics, Elsevier, vol. 44(2), pages 171-196, September.
- Englund, Peter & Hwang, Min & Quigley, John M., 2001.
"Hedging Housing Risk,"
SIFR Research Report Series
2, Institute for Financial Research.
- Englund, Peter & Hwang, Min & Quigley, John M., 2002. "Hedging Housing Risk," Berkeley Program on Housing and Urban Policy, Working Paper Series qt06t5d6v0, Berkeley Program on Housing and Urban Policy.
- Peter ENGLUND & Min HWANG & John M. QUIGLEY, 2000. "Hedging Housing Risk," FAME Research Paper Series rp26, International Center for Financial Asset Management and Engineering.
- Karl E. Case & Robert J. Shiller & Allan N. Weiss, 1991. "Index-Based Futures and Options Markets in Real Estate," Cowles Foundation Discussion Papers 1006, Cowles Foundation for Research in Economics, Yale University.
- Joao Cocco, 2000. "Hedging House Price Risk With Incomplete Markets," Computing in Economics and Finance 2000 317, Society for Computational Economics.
When requesting a correction, please mention this item's handle: RePEc:kap:jrefec:v:27:y:2003:i:2:p:191-209. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.