2012/08/01 by John Cotter, Stuart A. Gabriel, Cotter, John +3
Economics, Econometrics and Finance · #FOS: Economics and business #Housing Market and Economics #Insurance and Financial Risk Management #Portfolio Management (q-fin.PM) #Spatial and Panel Data Analysis
paper · pdf · doi:10.48550/arxiv.1208.0371
openalex publication_date 2012/08/01 · openalex created_date 2025/10/24 · openalex updated_date 2026/07/28
Geographic diversification is fundamental to risk mitigation among investors\nand insurers of housing, mortgages, and mortgage-related derivatives. To\ncharacterize diversification potential, we provide estimates of integration,\nspatial correlation, and contagion among US metropolitan housing markets.\nResults reveal a high and increasing level of integration among US markets over\nthe decade of the 2000s, especially in California. We apply integration results\nto assess the risk of alternative housing investment portfolios. Portfolio\nsimulation indicates reduced diversification potential and increased risk in\nthe wake of estimated increases in metropolitan housing market integration.\nResearch findings provide new insights regarding the synchronous\nnon-performance of geographically-disparate MBS investments during the late\n2000s.\n