The Analysis Of Real Estate Price Risk Based On The Risk Premium

In China,real estate is an important part of economy,meanwhile,it is one of the most important investment products.Real estate is highly related with financial market,and consequently,the prices fluctuation of real estate can cause changes in financial markets,and even the national economic system.In returns,the changes in other financial markets also impact the prices of real estate.To some extent,the uncertainty in real estate returns is the price risk.To avoid and minimize the risk,this paper analyzes the risk of real estate and predicts the real estate returns,which is significantly meaningful theoretically and practically.Aiming to analyze the risk of real estate returns,this thesis introduces the asset returns,economics variables and instrumental variables to establish the relationship between the real estate returns and risk premiums from stocks market,bonds markets and macro-economy market.Analyze real estate risk with quantitative method,and then predict the real estate returns.Through data analysis,this thesis strengthens the understanding of the beta coefficients and the risk premiums,and then analyzes their impacts on asset returns.Analyze the impact of instrumental variables on the fluctuation of the market risk premium.The empirical results are as follows:(1)Beta coefficients vary with the time.The returns from real estate are influenced by all the risk factors in bonds market,stock markets and macro-economy market.And the returns of real estate are sensitive to the risk premiums from different markets.(2)The risk premiums vary with the time,within a certain area.(3)The risk premiums are constructed as a "market portfolio" whose conditional expected values are the estimate of the risk premiums.Using the factor premiums that obtained from cross-section regression of assets returns on assets betas,this thesis regresses the premiums to assets returns.With average beta coefficients and the market risk premiums,we estimate the assets returns,the fitted asset returns,with pricing model.(4)We regress each return on a set of instrumental variables and calculate the sample variance of fitted values from the regression.The ratio of the variance shows that the model captures almost all the predictable variation of the asset returns.So that we are able to estimate the variation of real estate returns from bonds market risks,stock risks and macro-economy market risks.