Program > Papers by speaker > Heinen Andreas

We analyze time variation in the average dependence within a set of regional monthly house price index returns in a regime-switching multivariate copula model with a high and a low dependence regime. Using equidependent Gaussian copulas, we show that the dependence of house price returns varies across time, which reduces the gains from the geographic diversication of real estate and mortgage portfolios. More specically, we show that a decrease in leverage, and to a lesser extent an increase in mortgage rates, is associated with a higher probability of moving to and staying in the high dependence regime.