Homeowners' Risk Premia: Evidence from Zip Code Housing Returns

83 Pages Posted: 18 Jan 2019 Last revised: 5 May 2020

See all articles by Esther Eiling

Esther Eiling

University of Amsterdam - Amsterdam Business School

Erasmo Giambona

Syracuse University - Whitman School of Management - Finance Department; James D. Kuhn Center for Real Estate

Ricardo Lopez Aliouchkin

Syracuse University - Whitman School of Management

Patrick Tuijp

University of Amsterdam - Finance Group; Ortec Finance

Date Written: December 1, 2019

Abstract

While homeownership provides consumption benefits, housing is risky. Using zip code housing returns, we document that homeowners are compensated for bearing housing risk. Our sample covers more than 9,000 zip codes across 135 metropolitan statistical areas (MSAs), representing almost 70% of the U.S. population. We find that in 71% of the MSAs housing displays investment good properties with significant heterogeneity across MSAs in terms of which risk factors are priced. Local and idiosyncratic housing risks are the most important risks for homeowners, with the latter more likely priced in MSAs with lower loan--to--value and rent--to--price ratios.

Keywords: Expected Housing Returns, Risk Premia, Underdiversification, Market Segmentation

JEL Classification: G12, R30

Suggested Citation

Eiling, Esther and Giambona, Erasmo and Lopez Aliouchkin, Ricardo and Tuijp, Patrick, Homeowners' Risk Premia: Evidence from Zip Code Housing Returns (December 1, 2019). Available at SSRN: https://ssrn.com/abstract=3312391 or http://dx.doi.org/10.2139/ssrn.3312391

Esther Eiling

University of Amsterdam - Amsterdam Business School ( email )

Plantage Muidergracht 12
Amsterdam, 1018 TV
Netherlands

Erasmo Giambona

Syracuse University - Whitman School of Management - Finance Department; James D. Kuhn Center for Real Estate ( email )

721 University Avenue
RM 120-D
Syracuse, NY 13244-2450
United States
315 443-4885 (Phone)

Ricardo Lopez Aliouchkin (Contact Author)

Syracuse University - Whitman School of Management ( email )

721 University Ave
Syracuse, NY NY 13244
United States
+13154433672 (Phone)

HOME PAGE: http://www.ricardolopezaliouchkin.com/

Patrick Tuijp

University of Amsterdam - Finance Group ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

Ortec Finance ( email )

Orly Centre
Barajasweg 10
Amsterdam, 1043 CP
Netherlands

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