Can Metropolitan Housing Risk be Diversified? A Cautionary Tale from the Recent Boom and Bust
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|Title:||Can Metropolitan Housing Risk be Diversified? A Cautionary Tale from the Recent Boom and Bust||Authors:||Cotter, John
Gabriel, Stuart A.
|Permanent link:||http://hdl.handle.net/10197/3915||Date:||Jul-2012||Abstract:||Geographic diversification is fundamental to risk mitigation among investors and insurers of housing, mortgages, and mortgage-related derivatives. To characterize diversification potential, we provide estimates of integration, spatial correlation, and contagion among US metropolitan housing markets. Results reveal a high and increasing level of integration among US markets over the decade of the 2000s, especially in California. We apply integration results to assess the risk of alternative housing investment portfolios. Portfolio simulation indicates reduced diversification potential and increased risk in the wake of estimated increases in metropolitan housing market integration. Research findings provide new insights regarding the synchronous non-performance of geographically-disparate MBS investments during the late 2000s.||Funding Details:||Science Foundation Ireland||Type of material:||Working Paper||Publisher:||University College Dublin. Geary Institute||Copyright (published version):||2012, UCD Geary Institute||Keywords:||Integration; Correlation; Contagion; House price returns||Subject LCSH:||Housing--Prices--United States
Real estate investment--Rate of return
|Language:||en||Status of Item:||Not peer reviewed|
|Appears in Collections:||Geary Institute Working Papers|
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