Optimal Portfolio Choice with Predictability in House Prices and Transaction Costs
| Autor: | Carles Vergara-Alert, Jose L. Fillat, Stefano Corradin |
|---|---|
| Rok vydání: | 2009 |
| Předmět: |
Transaction cost
Economics and Econometrics Housing - Prices Durable good Boundary (real estate) Microeconomics House price Panel Study of Income Dynamics Accounting durable goods housing returns predictability optimal housing consumption and investment transaction costs Econometrics Economics Portfolio Asset (economics) Household finance Predictability Portfolio choice predictability house prices household finance Survey of Income and Program Participation health care economics and organizations Finance |
| Zdroj: | SSRN Electronic Journal. |
| ISSN: | 1556-5068 |
| DOI: | 10.2139/ssrn.1342755 |
| Popis: | We develop and solve a model of optimal portfolio choice with transaction costs and predictability in house prices. We model house prices using a process with a time-varying expected growth rate. Housing adjustments are infrequent and characterized by both the wealth-to-housing ratio and the expected growth in house prices. We find that the housing portfolio share immediately after moving to a more valuable house is higher during periods of high expected growth in house prices. We also find that the share of wealth invested in risky assets is lower during periods of high expected growth in house prices. Finally, the decrease in risky portfolio holdings for households moving to a more valuable house is greater in high-growth periods. These findings are robust to tests using household-level data from the Panel Study of Income Dynamics (PSID) and Survey of Income and Program Participation (SIPP) surveys. The coefficients obtained using model-simulated data are consistent with those obtained in the empirical tests. |
| Databáze: | OpenAIRE |
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