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http://hdl.handle.net/2451/27298
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| Title: | Housing Collateral, Consumption Insurance and Risk Premia: An Empirical Perspective |
| Authors: | Lustig, Hanno
Nieuwerburgh, Stijn Van |
| Keywords: | Asset Pricing
Risk Sharing |
| Issue Date: | 16-Feb-2004 |
| Series/Report no.: | S-MF-04-02 |
| Abstract: | In a model with housing collateral, the ratio of housing wealth to human
wealth shifts the conditional distribution of asset prices and
consumption growth. A decrease in house prices reduces the collateral
value of housing, increases household exposure to idiosyncratic risk,
and increases the conditional market price of risk. Using aggregate data
for the US, we find that a decrease in the ratio of housing wealth to
human wealth predicts higher returns on stocks. Conditional on this
ratio, the covariance of returns with aggregate risk factors explains
eighty percent of the cross-sectional variation in annual size and
book-to-market portfolio returns. |
| URI: | http://hdl.handle.net/2451/27298 |
| Appears in Collections: | Macro Finance
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