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Chasing housing prices: Working paper series--06-08

Atkins, Allen and Chiang, Kevin C.H. and Lee, Ming-Long (2006) Chasing housing prices: Working paper series--06-08. Working Paper. NAU W.A. Franke College of Business.


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If a person or organization is planning to buy real estate in the future but is unable or unwilling to buy it now, how can they best "hedge" this purchase? In what class of asset should they invest their money until they are ready to purchase the real estate? This paper uses Monte Carlo simulation and bootstrap techniques to help answer these questions. We find that the best "purchase early" hedge for both residential and commercial real estate is small value stocks. Small value stocks would be the most likely to provide returns at least as good as real estate and they would be least likely to suffer losses relative to real estate. The effectiveness of the hedge increases the longer the time horizon of the investor. Large value stocks and equity REITs are also quite good but not as good as small value stocks. Other asset classes are not nearly as effective. The least effective asset class is T-Bills.

Item Type: Monograph (Working Paper)
Publisher’s Statement: Copyright, where appropriate, is held by the author.
ID number or DOI: 06-08
Keywords: Working paper, Housing prices, REIT, risk management
Subjects: H Social Sciences > HG Finance
NAU Depositing Author Academic Status: Faculty/Staff
Department/Unit: The W.A. Franke College of Business
Date Deposited: 18 Oct 2015 01:46
URI: http://openknowledge.nau.edu/id/eprint/1549

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