People choose where to live and how much to invest in housing. Traditionally, the first decision has been the domain of spatial economics, while the second has been analyzed in finance. Spatial asset pricing is an attempt to combine equilibrium concepts from both disciplines. In the finance context, we show how spatial decisions can be framed as an expanded portfolio problem. Within spatial economics, we identify the consequences of hedging motives for location decisions. We characterize a number of observable deviations from standard predictions in finance (e.g., the definition of the relevant market portfolio for the pricing of risk includes homeownership rates) and in spatial economics (e.g., hedging considerations and the pricing of risk affect the geographic allocation of human capital).
Ortalo-Magne, Francois, and Andrea Prat. "Spatial Asset Pricing: A First Step." Economica 83, no. 329 (January 2016): 130-171.
Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.
Each topic is linked to an index of publications on that topic.