|
Activity Number:
|
247
|
|
Type:
|
Contributed
|
|
Date/Time:
|
Tuesday, July 31, 2007 : 8:30 AM to 10:20 AM
|
|
Sponsor:
|
Business and Economics Statistics Section
|
| Abstract - #308870 |
|
Title:
|
Optimal House Tenure and Portfolio Choice with Housing as a Hedging Asset
|
|
Author(s):
|
Yu Zhang*+
|
|
Companies:
|
Columbia Business School
|
|
Address:
|
3022 Broadway, New York, NY, 10027,
|
|
Keywords:
|
variable selection ; portfolio choice ; optimization ; real estate ; numerical dynamic programming
|
|
Abstract:
|
House tenure and portfolio choice are affected by several factors such as house prices, rents, labor incomes, and interest rates. Both volatilities of these factors and the comovements among them are potential factors. This paper explores the optimal life-cycle portfolio and house tenure choice with housing as a hedge against rent risks and labor income fluctuations. Forward and backward methods are employed in variable selection. Volatilities in rents and the comovement of labor income and house prices turn out to be important determinants to the household's optimization. The motive to hedge against rent risks explains the overinvestment puzzle. Constrained maximization results show that homeownership crowds out stock market participation: costly adjustments in housing calls for the liquidity provided by bonds.
|
- The address information is for the authors that have a + after their name.
- Authors who are presenting talks have a * after their name.
Back to the full JSM 2007 program |
