Lead PI: Prof. John Cotter

The aim of this work package is to increase our understanding of the role of risk in the real economy by modelling the associated asset pricing implications and extending the set of candidate risk measures for use in the management of real estate. We propose to develop an asset pricing model of house prices incorporating both temporal and cross sectional (geographical) effects. Real estate is chosen given its importance for developed economies and given that it has also been the sector most closely associated with the current world financial turmoil.
Given the scale of wealth invested in real estate, and its role in many asset portfolios, it is clearly beneficial to understand the risk associated with real estate investment. The work in this work package overlaps with WP7 where we examine risk both within and across asset classes, including real estate.