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Optimal Consumption and Portfolio Choices with Housing Dynamics

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Publicado en:Economics vol. 19, no. 1 (2025)
Autor principal: Deng Xiaoyu
Otros Autores: Liu Xixian, Sun Qianmin, Wu Banggang
Publicado:
Walter de Gruyter GmbH
Materias:
China
Risk aversion
Recursion
Risk
Residential preferences
Wealth
Clearing houses
Households
Consumption
Housing
Renting
Decision making
Home ownership
Constraints
Utility functions
Portfolios
Acceso en línea:Citation/Abstract
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Resumen:This study develops a dynamic model to analyze the optimal consumption and portfolio choices of households acquiring housing services through renting or owning. The model incorporates time-varying financial constraints, represented by the liquid wealth-to-house value ratio, to provide a unified framework for decision-making. We examine the optimal timing and size of house purchases, highlighting the role of intergenerational transfers in facilitating homeownership. By employing a recursive utility function that disentangles risk aversion from the elasticity of intertemporal substitution, the model extends beyond the limitations of standard CRRA utility. Empirical validation using data from the China Household Finance Survey reveals strong consistency between theoretical predictions and observed household behaviors, offering new insights into housing and portfolio decisions under financial constraints.
ISSN:1864-6042
DOI:10.1515/econ-2025-0132
Fuente:ABI/INFORM Global