Risk and Return in the Single-Family Housing Market
Working Paper #96-16
Posted: 15 Nov 1996
Date Written: July 1996
The tradeoff between risk and return in equity markets is well established. This paper examines the existence of the same tradeoff in the single-family housing market. For home buyers, who constitute about two-thirds of U.S. households, the choice about how much housing and which house to buy is a joint consumption/investment decision. Does this consumption/investment link negate the risk/return tradeoff within the single-family housing market? Theory suggests the link still holds. This paper supplies empirical evidence insupport of that theoretical result. The views expressed here are solely those of the author and do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or of the Federal Reserve System.
JEL Classification: R21, G11
Suggested Citation: Suggested Citation