 Portfolio choice with indivisible and illiquid housing assets: the case of SpainSergio Mayordomo, Maria Rodriguez-Moreno and Juan Ignacio Pe�a Quantitative Finance, 2014, vol. 14, issue 11, 2045-2064 Abstract: This paper studies the investment decisions of Spanish households using a unique data-set, the Spanish Survey of Household Finance (EFF). We propose a theoretical model in which households, given a fixed investment in housing, allocate their net wealth across bank time deposits, stocks and mortgage. Besides considering housing as an indivisible and illiquid asset that restricts the portfolio choice decision, we take into account the financial constraints that households face when they apply for external funding. For every representative household in the EFF, we solve this theoretical problem and obtain the theoretically optimal portfolio that is then compared with households' actual choices. We find that households significantly under-invest in stocks and deposits while the optimal and actual mortgage investments agree. Considering the three types of financial assets at once, we find that the households headed by highly financially sophisticated, older, retired, richer, and unconstrained persons are the ones investing more efficiently. Date: 2014 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:14:y:2014:i:11:p:2045-2064 Ordering information: This journal article can be ordered from DOI: 10.1080/14697688.2013.843786 Access Statistics for this article Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral More articles in Quantitative Finance from Taylor & Francis Journals |
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