Geographic Dependence and Diversification in House Price Returns: The Role of Leverage - CY Cergy Paris Université
Article Dans Une Revue Journal of Financial Econometrics Année : 2022

Geographic Dependence and Diversification in House Price Returns: The Role of Leverage

Résumé

Abstract We analyze the time variation in the average dependence within a set of regional monthly house price index returns in a regime-switching multivariate copula model with a high and a low dependence regime. Using equidependent Gaussian copulas, we show that the dependence of house price returns varies across time with changes in credit market conditions, which reduces the gains from the geographic diversification of real estate and mortgage portfolios. More specifically, we show that a decrease in leverage, measured by the loan-to-value ratio, and to a lesser extent an increase in mortgage rates, are associated with a higher probability of moving to and staying in the high dependence regime.
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Dates et versions

hal-04266132 , version 1 (31-10-2023)

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Andréas Heinen, Mi Lim Kim, Malika Hamadi. Geographic Dependence and Diversification in House Price Returns: The Role of Leverage. Journal of Financial Econometrics, 2022, ⟨10.1093/jjfinec/nbac037⟩. ⟨hal-04266132⟩
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