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Paper eres2011_84:
Housing Services and Volatility Bounds with Real Estate Returns

id eres2011_84
authors Pakoš, Michal; Zem__k, Petr
year 2011
title Housing Services and Volatility Bounds with Real Estate Returns
source 18th Annual European Real Estate Society Conference in Eindhoven, the Netherlands
summary We investigate the role of a real estate market in consumption based asset pricing models. A long-standing issue in this context is the inability of these models to match the equity premium observed in the data. Piazzesi, Schneider, and Tuzel (2007) use a model with housing services that comes closer to matching the premium. We look at the performance of this model from a different perspective. Rather than focusing on the model implied returns, we use historical returns to construct the Hansen-Jagannathan volatility bounds for the inter-temporal rate of substitution (a stochastic discount factor). Our returns include real estate returns in addition to the typically included returns on stocks and a risk-free asset. Then we calculate moments of a stochastic discount factor implied by the model from Piazzesi, Schneider, and Tuzel (2007). These moments are shown to be above the Hansen-Jagannathan volatility bounds.
keywords Equity premium puzzle; Hansen-Jagannathan volatility bounds; housing services; stochastic discount factor; real estate returns.
series ERES:conference
content file.pdf (139,111 bytes)
discussion No discussions. Post discussion ...
session D6: Risk Management, Measuring Volatility
last changed 2014/10/21 21:51
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