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Risk and Return to Housing, Tenure Choice and the Value of Housing in an Asset Pricing Context
Author(s) -
Meyer Richard,
Wieand Kenneth
Publication year - 1996
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00683
Subject(s) - economics , capital asset pricing model , home equity , equity (law) , value (mathematics) , asset (computer security) , context (archaeology) , consumption based capital asset pricing model , financial economics , microeconomics , business , finance , paleontology , computer security , machine learning , political science , computer science , law , biology
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.