ISSUES:
 
Property accounts for a substantial proportion of the assets of the household sector in most developed
economies. Individual households typically hold a dramatically undiversified portfolio of houses - usually the
single property in which they live. This is strange on standard portfolio grounds. It raises a whole lot of
interesting issues:
How do we measure the risk of houses? What are the correlations between housing returns and other assets

(ie. what might beta’s look like)? Is renting a better option on risk grounds because of the problems of
diversification and the lumpy nature of home ownership? Are there big regional variations in house price
changes so that someone intending to live in the same area in the long term is actually hedging by buying
property?
 
SELECTED READING:
 
Smith, R. and Fallis (1988),“Recent Developments in Economic Models of the Housing Market”, The Journal 
of Economic Literature, pp 29-64.
 
Miles, D. (1992), “Housing and the Wider Economy in the Short and Long Run", National Institute Economic 
Review, February, 139, pp 64-78
 
Caplin, Chan, Freeman and Tracy (1997), “Housing Partnerships”, MIT Press
 
Poterba, J. (1992), “Taxation and Housing: Old Questions and New Answers”, American Economic Review, 
82, 2, pp. 237-42.
 
DATA 英语论文网 【http://www.51lunwen.org】SOURCE: Datastream.

PENSIONS AS AN ASSET CLASS

ISSUES:
 
In most developed countries households hold a large fraction of their wealth in pensions.  These might be
pensions provided by employers (called occupational pensions) or pensions that are administered by the
government (called state pensions).  Further, some pensions are of the defined benefit (DB) type and other
are of the defined contribution (DC) type.  Both types of pensions, provided by both government and firms,
expose members and companies to risks.    How can these risks be measured?  What are the trade-offs tha
might affect an individual’s pension choice?    
 
SELECTED READING:
 
Bodie, Zvi, Alan J. Marcus, and Robert C. Merton (1988), “Defined Benefit versus Defined Contribution
Pension Plans: What are the Real Tradeoffs?” in Z. Bodie, J. Shoven and D. Wise, eds., Pensions in the US
Economy. Chicago: University of Chicago Press.
 
Blake, D. (1998), “Pension Schemes as Options on Pension Fund Assets: Implications for Pension Fund
Management.” Insurance Mathematics & Economics, 23, 3, pp, 263-86. 
 
McCarthy, D. (2003), “A Lifecycle Analysis of DB Pension Plans”, Journal of Pension Economics and
Finance, 2, 2, pp 99-126
 
DATA SOURCE: Datastream.

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