A theory of housing collateral, consumption insurance and risk premia
By: Hanno Lustig, Stijn Van Nieuwerburgh.
Contributors: Nieuwerburgh, Stijn Van.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10955; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10955.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "In a model with housing collateral, 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.  This collateral mechanism can quantitatively replicate the conditional and the cross-sectional variation in risk premia on stocks for reasonable parameter values.  The increase of the conditional equity premium and Sharpe ratio when collateral is scarce in the model matches the increase observed in US data.  The model also generates a return spread of value firms over growth firms of the magnitude observed in the data, because the term structure of consumption strip risk premia is downward sloping"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/11/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.