COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1648 Derivatives Markets for Home Prices Robert J. Shiller March 2008 The establishment recently of risk management vehicles for home prices
is described. The potential value of such vehicles, once they become established, is seen
in consideration of the inefficiency of the market for single family homes. Institutional
changes that might derive from the establishment of these new markets are described. An
important reason for these beginnings of real estate derivative markets is the advance in
home price index construction methods, notably the repeat sales method, that have appeared
over the last twenty years. Psychological barriers to the full success of such markets are
discussed. |
