Abstract
The main objective of this work is to construct a model that could be used to study investment dynamics, house prices, real estate returns and the equity premium within the same uni…ed framework. The second objective is to show that the introduction of habit formation and residential real estate in the utility function provides an explanation of the puzzling volatility of house prices. To address these issues, we construct a two-sector model composed of a real estate sector and of a non-residential sector. The main contribution of this work is to show that an extended version of the standard neoclassical model is able to generate theoretical moments and risk premiums that are in line with the stylized facts.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
