University of Cambridge > Talks.cam > Cambridge Finance Workshop Series > Can Metropolitan Housing Risk Be Diversified? A Cautionary Tale from the Recent Boom and Bust

Can Metropolitan Housing Risk Be Diversified? A Cautionary Tale from the Recent Boom and Bust

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  • UserJohn Cotter is Professor in Finance and the Chair in Quantitative Finance at University College Dublin. World_link
  • ClockThursday 11 June 2015, 13:00-14:00
  • HouseRoom W4.03 Judge Business School.

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This study evaluates the effectiveness of geographic diversification in reducing housing investment risk. To characterize diversification potential, we estimate spatial correlation and integration among 401 US metropolitan housing markets. The 2000s boom brought a marked uptrend in housing market integration associated with eased residential lending standards and rapid growth in private mortgage securitization. As boom turned to bust, macro factors, including employment and income fundamentals, contributed importantly to the trending up in housing return integration. Portfolio simulations reveal substantially lower diversification potential and higher risk in the wake of increased market integration.

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This talk is part of the Cambridge Finance Workshop Series series.

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