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1) Bad Timing and Behavioral Finance
2) Owning a Home Is Already a Hedge
3) Not-Ready for Prime-time
Read the whole thing, and expect Jason Ruspini’s comment, here or there.
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What Steve Roman said a while ago is still true – that retail hedging is an "imaginary niche". Shiller might tend to misjudge the risk appetites of others, although he would probably argue that it is a matter of education. This is true insofar as education tends to increase relative wealth and decrease risk appetite.
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Probably an ETF would be more popular – but not, you know, like the up/down Macroshares… The futures need to be deeper before lenders use them to sell protection in mortgages. If housing weren’t dropping precipitously market-makers might be more willing to come in with tight two-way prices. The lagged structure of the index is also a factor.. none of this is news.
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Tax futures might suffer from some of the same problems. With the dems-to-win contracts hardly moving and the extra difficulties in backing tax rates out of muni spreads (ahem), there haven’t been many advanced indicators recently to shake the tree. Under different regulatory situations, the increased "basis risk" in munis might help tax futures volume.