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.
Volume (Year): 18 (2005)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.|
Web page: http://www.rfs.oupjournals.org/
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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.