Risk and Return to Housing, Tenure Choice and the Value of Housing in an Asset Pricing Context
REAL ESTATE ECONOMICS, Vol. 24 No. 1
Posted: 3 Jul 1998
Homeowners do not diversify their risky home equity because of fixed costs of issuing securities and information costs. An asset pricing model is developed for homeowners with the undiversifiable home equity asset. Homeowner value and house value to diversified landlords are compared, and a tenure choice equation is developed. We demonstrate the existence of a rational expectations equilibrium under appropriate conditions.
JEL Classification: G12
Suggested Citation: Suggested Citation