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Real estate portfolio allocation: The European consumers’ perspective |
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| Affiliation: | 1. LARGE, Strasbourg University and ACPR – Banque de France, France;2. LARGE-EM Strasbourg and Strasbourg University, France;1. Department of Economics and Econometrics, University of Johannesburg, APK Campus, D Ring 213, PO Box 524, Auckland Park 2006, Johannesburg, South Africa;2. CORE, Université catholique de Louvain, Belgium;1. Charles River Associates, United States;2. University of Missouri, United States;3. Freddie Mac, United States;1. Department of Orthopaedic Surgery, University of Minnesota, Minneapolis, U.S.A.;2. Tria Orthopaedic Center, Bloomington, Minnesota, U.S.A. |
| Abstract: | Owner occupied housing facilitates household wealth accumulation and the stability of consumption in developed countries. It also contributes to other social goals. But owner-occupied housing is also a risky investment. This paper synthesizes existing knowledge about the riskiness of housing investment in European economies during the past quarter century. It also presents estimates of the potential gains to European consumers from investments in derivatives which may reduce risk at the individual level. We find that futures markets in house price indexes may increase portfolio returns for European investors by several percentage points at the same level of risk. We also consider practical steps to develop markets for these investments. |
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