Risk and return within the single-family housing market

The trade-off between risk and return in equity markets is well established . This paper examines the existence of the same trade-off in the single-fam ily housing market. That market is dominated by homeowners, who constitute about two-thirds of U.S, households. For them the choice about how much hou sing and what house to buy is a joint consumption-investment decision. Furt hermore, owner-occupied housing is by nature a lumpy investment whose risk cannot be completely diversified. Does this consumption-investment link neg ate the risk-return trade-off within the single-family housing market? Theo ry suggests the link still holds. This paper supplies empirical evidence in support of that theoretical result.