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Efficient Portfolios when Housing Needs Change over the Life-Cycle

Loriana Pelizzon () and Guglielmo Weber

No 37, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: We address the issue of the efficiency of household portfolios in the presence of housing risk. We treat housing stock as an asset and rents as a stochastic liability stream: over the life-cycle, households can be short or long in their net housing position. Efficient financial portfolios are the sum of a standard Markowitz portfolio and a housing risk hedge term that multiplies net housing wealth. Our empirical results show that net housing plays a key role in determining which household portfolios are inefficient. The largest proportion of inefficient portfolios obtains among those with positive net housing, who should invest more in stocks.

Keywords: Housing and portfolio choice; Portfolio efficiency; Rental risk; Life-cycle (search for similar items in EconPapers)
JEL-codes: D91 G11 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2007-02
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: Efficient portfolios when housing needs change over the life cycle (2009) Downloads
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