We examine how the predictability of real estate returns affects the risk of, and optimal allocations to, real estate for investors of differing investment horizons. Returns to direct real estate are mean reverting, and risk decreases with horizon. This is driven by a tendency for property transaction prices to overshoot inflation. Mean reversion in real estate returns is weaker than that of equities, resulting in real estate having similar risk to equities for long-term investors. However, optimal portfolios have large allocations to direct real estate at all horizons, and the allocation increases with horizon. Finally, we find that real estate investment trusts are a redundant asset class for investors with access to direct real estate as an asset class, but they do have a role in optimal allocations when direct property investment is not feasible. Copyright (c) 2009 American Real Estate and Urban Economics Association.

Many financial economists are puzzled by the fact that stock returns are higher under Democratic than Republican presidencies. In this paper, we test whether this return differential is explained by risk using a conditional version of the Fama and French (1993) model that allows risk to vary across political cycles. We find that the presidential puzzle can be explained when risk is properly taken into account. Much of the return differential can be attributed to the fact that Democratic presidencies are associated with higher market and default risk premiums than their Republican counterparts.

No abstract

Since 2009, Canadians have had the opportunity to contribute to tax-free savings accounts (TFSAs). This study provides insight into the attributes of TFSA participants. I use data from the Canada Revenue Agency (CRA) for general participation trends and the 2012 Survey of Financial Security (SFS) to examine the socio-economic characteristics of participants and their contributions. Examining data from the CRA, I find that the majority of tax-filing Canadians did not participate in the TFSA program by 2013, with age and income level affecting participation and contribution decisions. Evidence from the SFS data corroborates that obtained from the CRA data. I find that households with children or households headed by individuals with less than postsecondary education are less likely to participate. In addition, I find that households with higher net worth are more likely to participate and contribute more. Consequently, I conclude that TFSAs are likely to have an economically significant distributional impact, making them less attractive on distributional grounds.