Optimal Consumption and Portfolio Choices with Risky Housing and Borrowing Constraints
We examine the optimal dynamic portfolio decisions for investors who acquire housing services from either renting or owning a house. Our results show that when indifferent between owning and renting, investors owning a house hold a lower equity proportion in their net worth (bonds, stocks, and home equity), reflecting the substitution effect, yet hold a higher equity proportion in their liquid portfolios (bonds and stocks), reflecting the diversification effect. Furthermore, following the suboptimal policy of always renting leads investors to overweigh in stocks, while following the suboptimal policy of always owning a house causes investors to underweigh in stocks. Copyright 2005, Oxford University Press.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 18 (2005)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: |
Web page: http://www.rfs.oupjournals.org/Email:
More information through EDIRC
|Order Information:||Web: http://www4.oup.co.uk/revfin/subinfo/|
When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:18:y:2005:i:1:p:197-239. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.