%0 Conference Paper %B 14ª Conferência Internacional da LARES %D 2014 %T Supply & Demand Determinants of Home-Price Sensitivity to Capital Market Factors %A Christopher W. Anderson %A Eli Beracha %A Minjie Huang %X

Finance theory suggests that personal wealth invested in a home should affect other household financial decisions such as portfolio allocations among financial investments. However, little empirical work exists to suggest how homeowners might evaluate their home’s exposure to capital market risk factors in order to incorporate such information into their broader investment decision making. In this paper we investigate how home-price sensitivity to equity market risk factors varies across more than two thousand ZIP Codes in 74 US cities. Our investigation suggests that a homeowner’s exposure to capital market risk factors varies by city-specific supply and demand factors, especially for ZIP Codes with higher priced homes whose residents are most likely stock market participants and corporate executives. Our results are twofold. First, we segment ZIP Codes by the city-specific measure of housing supply constraints and supply elasticity as developed by Saiz (2010). Among above-median priced zip codes we find that home-price sensitivity to equity market risk increases with city-specific supply constraints. Second, recent research in finance documents that equity incentives in managerial compensation vary across US cities due to agglomeration patterns in corporate headquarters decisions and social network effects in executive compensation schemes among same-city firms. We measure the level of equity-based pay incentives for CEOs and other top executives among firms that share headquarters cities. Consistent with a conjecture by Cannon, Miller, and Pandher (2006), among above-median priced ZIP Codes home- price sensitivity to equity market risk increases in MSA-level incentives for managerial risk-taking.

%B 14ª Conferência Internacional da LARES %S LARES %C Rio de Janeiro %8 09/2014 %@ 978-85-66934-04-5 %G PT-BR %! 14aLARES %R 10.15396/lares_2014_anderson_beracha_huang_2014