Hedging House Price Risk: Portfolio Choice With Housing Futures
Preprint
- 31 July 2008
- preprint
- Published by Elsevier in SSRN Electronic Journal
Abstract
We assess the economic benefits of having access to housing futures for homeowning investors, using a model for the portfolio choice between stocks, bonds of various maturity, different mortgage types, and housing futures. We compare the utility gains of housing futures with the economic benefits of two other important housing-related portfolio decisions: (i) incorporating the housing exposure in financial portfolio choice and (ii) mortgage choice. Our analysis indicates that the portfolio implications and welfare improvements of the housing futures are small. This is mainly due to the large remaining idiosyncratic house price risk which cannot be hedged using futures written on a city-level house price index.Keywords
This publication has 27 references indexed in Scilit:
- Homeownership as a Constraint on Asset AllocationThe Journal of Real Estate Finance and Economics, 2007
- Consumption and Portfolio Choice over the Life CycleThe Review of Financial Studies, 2005
- Portfolio Choice in the Presence of HousingThe Review of Financial Studies, 2004
- Household Risk Management and Optimal Mortgage ChoiceThe Quarterly Journal of Economics, 2003
- Dynamic Asset Allocation under InflationThe Journal of Finance, 2002
- Strategic Asset AllocationPublished by Oxford University Press (OUP) ,2002
- Who Should Buy Long-Term Bonds?American Economic Review, 2001
- Consumption and Investment Motives and the Portfolio Choices of HomeownersThe Journal of Real Estate Finance and Economics, 1997
- The Efficiency of the Market for Single-Family HomesPublished by National Bureau of Economic Research ,1988
- Prices of Single Family Homes Since 1970: New Indexes for Four CitiesPublished by National Bureau of Economic Research ,1987