EconPapers    
Economics at your fingertips  
 

Portfolio Choice with Indivisible and Illiquid Housing Assets: The Case of Spain

Sergio Mayordomo (), María Rodríguez-Moreno () and Juan Ignacio Peña ()
Additional contact information
María Rodríguez-Moreno: European Central Bank
Juan Ignacio Peña: Department of Business Administration, Universidad Carlos III de Madrid

No 24/12, Faculty Working Papers from School of Economics and Business Administration, University of Navarra

Abstract: This paper presents a procedure for computing the theoretically optimal portfolio under the assumption that housing is an indivisible, illiquid asset that restricts the portfolio choice decision. The analysis also includes the financial constraints households may face when they apply for external funding. The set of financial assets that constitute the household's portfolios are bank time deposits, stocks, mortgage, and housing. We compare the theoretically optimal portfolio against Spanish household's actual choices using a unique data set, the Spanish Survey of Household Finance. In comparison with the optimal portfolio, households significantly underinvest in stocks and deposits. In the case of mortgages, the optimal and actual portfolios weights are not unequal. At a more disaggregated level, some additional differences emerge that are explained by demographic, educational, and income characteristics.

Keywords: Portfolio choice; Households; Indivisible illiquid assets; Financial constraints; Under-investment (search for similar items in EconPapers)
JEL-codes: C61 D14 G11 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2012-12-21
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 (1) Track citations by RSS feed

Downloads: (external link)
http://www.unav.edu/documents/10174/6546776/1356049966_WP_UNAV_24_12.pdf (application/pdf)

Related works:
Journal Article: Portfolio choice with indivisible and illiquid housing assets: the case of Spain (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:una:unccee:wp2412

Access Statistics for this paper

More papers in Faculty Working Papers from School of Economics and Business Administration, University of Navarra
Bibliographic data for series maintained by ().

 
Page updated 2020-08-01
Handle: RePEc:una:unccee:wp2412