TY  - JOUR
AU  - Piazzesi,Monika
AU  - Schneider,Martin
AU  - Tuzel,Selale
TI  - Housing, Consumption, and Asset Pricing
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12036
PY  - 2006
Y2  - February 2006
UR  - http://www.nber.org/papers/w12036
L1  - http://www.nber.org/papers/w12036.pdf
N1  - Author contact info:
Monika Piazzesi
Department of Economics
Stanford University
579 Serra Mall
Stanford, CA 94305-6072
Tel: (650) 723-9289
E-Mail: piazzesi@stanford.edu

Martin Schneider
Department of Economics
Stanford University
579 Serra Mall
Stanford, CA 94305-6072
Tel: (650) 721 6320
E-Mail: schneidr@stanford.edu

Selale Tuzel
USC Marshall School of Business
701 Exposition Blvd. Hoffman 701
Los Angeles, CA, 90089
E-Mail: tuzel@marshall.usc.edu
AB  - This paper considers a consumption-based asset pricing model where housing is explicitly modeled both as an asset and as a consumption good. Nonseparable preferences describe households' concern with composition risk, that is, fluctuations in the relative share of housing in their consumption basket. Since the housing share moves slowly, a concern with composition risk induces low frequency movements in stock prices that are not driven by news about cash flow. Moreover, the model predicts that the housing share can be used to forecast excess returns on stocks. We document that this indeed true in the data. The presence of composition risk also implies that the riskless rate is low which further helps the model improve on the standard CCAPM.
ER  -