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Efficient portfolios when housing needs change over the life cycle

Loriana Pelizzon () and Guglielmo Weber ()

Journal of Banking & Finance, 2009, vol. 33, issue 11, 2110-2121

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)
Date: 2009
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Related works:
Working Paper: Efficient Portfolios when Housing Needs Change over the Life-Cycle (2007) Downloads
Working Paper: Efficient Portfolios when Housing Needs Change over the Life-Cycle (2007) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:11:p:2110-2121

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