The impact of housing on a homeowner's investment portfolio

Authors

  • Chen Y. Wu Department of Finance, The University of Texas at Tyler
  • Vivek K. Pandey Department of Finance, The University of Texas at Tyler

DOI:

https://doi.org/10.61190/fsr.v21i2.4670

Keywords:

Inflation hedge, Portfolio diversification, Residential real estate, Housing

Abstract

We examine the inflation hedging and portfolio enhancing properties of residential real estate that makes up a significant part of the individual homeowner-investor's investment portfolio. Using 22 S&P/Case-Shiller city-level and composite indices, we show that residential real estate is at best a modest hedge against inflation. Adding residential real estate can potentially enhance the mean­ variance efficiency of portfolios made up of financial assets such as stocks and bonds. However, to take advantage of the diversification benefits of residential real estate, homeowner-investors must rebalance their portfolios periodically, which may not always be a practically feasible option.

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Published

2012-06-30

How to Cite

Wu, C. Y., & Pandey, V. K. (2012). The impact of housing on a homeowner’s investment portfolio. Financial Services Review, 21(2), 177–194. https://doi.org/10.61190/fsr.v21i2.4670

Issue

Vol. 21 No. 2 (2012): FSR Summer 2012

Section

New Original Submission

License

Copyright (c) 2012 Academy of Financial Services

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