Arbeitspapier
Optimal portfolio choice with predictability in house prices and transaction costs
We generalize the classic Grossman and Laroque (1990) (GL) model of optimal portfolio choice with housing and transaction costs by introducing predictability in house prices. As in the GL model, agents only move to more expensive (cheaper) houses when their wealth-to-housing ratios reach an optimal lower (upper) boundary. However, in our model, these boundaries are time-varying and depend on the dynamics of the expected growth rate of house prices. We find that households moving to a more expensive house in periods of high expected growth in house prices have significantly lower ex-ante wealth-to-housing ratios than those moving in periods of low expected growth. We also find that the share of wealth invested in risky assets is lower during periods of high expected growth in house prices and that it is higher right before moving during periods of low growth. The main implications of the model are robust to tests using household level data from the PSID and SIPP surveys.
- Sprache
-
Englisch
- Erschienen in
-
Series: ECB Working Paper ; No. 1470
- Klassifikation
-
Wirtschaft
Portfolio Choice; Investment Decisions
Consumer Economics: Theory
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
Optimization Techniques; Programming Models; Dynamic Analysis
- Thema
-
Durable goods
housing returns predictability
optimal housing consumption and investment
transaction costs
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Corradin, Stefano
Fillat, José L.
Vergara-Alert, Carles
- Ereignis
-
Veröffentlichung
- (wer)
-
European Central Bank (ECB)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2012
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Corradin, Stefano
- Fillat, José L.
- Vergara-Alert, Carles
- European Central Bank (ECB)
Entstanden
- 2012
Ähnliche Objekte (12)
Markowitz portfolios under transaction costs
Markowitz portfolios under transaction costs
Portfolio strategies with transaction costs
Worst-Case Portfolio Optimization: Transaction Costs and Bubbles
Portfolio Optimization and Stochastic Control under Transaction Costs
Large-scale portfolio allocation under transaction costs and model uncertainty
Large-scale portfolio allocation under transaction costs and model uncertainty
Predictability of reserve demand, information costs and portfolio behavior of commercial banks
Markets and transaction costs
Delivering left-skewed portfolio payoff distributions in the presence of transaction costs
Transaction Management: Value Creation by Reducing Transaction Costs
Assessing stop-loss and constant proportion portfolio insurance: The impact of transaction costs
Markowitz portfolios under transaction costs
Markowitz portfolios under transaction costs
Portfolio strategies with transaction costs
Worst-Case Portfolio Optimization: Transaction Costs and Bubbles
Portfolio Optimization and Stochastic Control under Transaction Costs
Large-scale portfolio allocation under transaction costs and model uncertainty
Large-scale portfolio allocation under transaction costs and model uncertainty
Predictability of reserve demand, information costs and portfolio behavior of commercial banks
Markets and transaction costs
Delivering left-skewed portfolio payoff distributions in the presence of transaction costs
Transaction Management: Value Creation by Reducing Transaction Costs
Assessing stop-loss and constant proportion portfolio insurance: The impact of transaction costs
Markowitz portfolios under transaction costs
Markowitz portfolios under transaction costs
Portfolio strategies with transaction costs
Worst-Case Portfolio Optimization: Transaction Costs and Bubbles
Portfolio Optimization and Stochastic Control under Transaction Costs
Large-scale portfolio allocation under transaction costs and model uncertainty
Large-scale portfolio allocation under transaction costs and model uncertainty
Predictability of reserve demand, information costs and portfolio behavior of commercial banks
Markets and transaction costs
Delivering left-skewed portfolio payoff distributions in the presence of transaction costs
Transaction Management: Value Creation by Reducing Transaction Costs