A Comparative Study on the Performance of Residential Properties, Stocks Savings in Household Asset Portfolio

摘要

The households in the Chinese urban area now have much more options in selecting assets. The most common assets they prefer are savings, stocks and houses. By quoting the price indices on the housing market and the stock market, and the deposit rates in the financial market, the paper explores the variances of these three major household assets with respect to their risk-return characteristics within the studied period from 1993 to 2002. Moreover the paper discussed the correlations between residential property, property stock, general stock, saving deposit and customer price index (CPI), and experimented to establish, by the Capital Asset Pricing Model (CAPM), a market portfolio of the security market and the housing market, setting security market line (SML). According to the result, on a quarterly basis, residential property investment produces higher risk-adjusted returns than general or property stock investment. However, on an annual basis, the residential property investment is not superior to stock investment. Because of low correlations between residential property and stock returns, residential property is a good candidate for being included into the household's investment portfolio to diversify the unsystematic risk. Residential property investment and property stock investment can be regarded as efficient hedges against inflation. As for residential property, more than 86 percent of the total risk is unsystematic risk. The beta for residential property is the smallest, and general stock is the highest, with the property stock at the middle.