TY  - UNPD
A1  - Kraft, Holger
A1  - Munk, Claus
T1  - Optimal housing, consumption, and investment decisions over the life-cycle
T2  - Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 197
N2  - We provide explicit solutions to life-cycle utility maximization problems simultaneously involving dynamic decisions on investments in stocks and bonds, consumption of perishable goods, and the rental and the ownership of residential real estate. House prices, stock prices, interest rates, and the labor income of the decision-maker follow correlated stochastic processes. The preferences of the individual are of the Epstein-Zin recursive structure and depend on consumption of both perishable goods and housing services. The explicit consumption and investment strategies are simple and intuitive and are thoroughly discussed and illustrated in the paper. For a calibrated version of the model we find, among other things, that the fairly high correlation between labor income and house prices imply much larger life-cycle variations in the desired exposure to house price risks than in the exposure to the stock and bond markets. We demonstrate that the derived closed-form strategies are still very useful if the housing positions are only reset infrequently and if the investor is restricted from borrowing against future income. Our results suggest that markets for REITs or other financial contracts facilitating the hedging of house price risks will lead to non-negligible but moderate improvements of welfare.
T3  - Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting - 197 
KW  - housing
KW  - labor income
KW  - portfolio choice
KW  - life-cycle decisions
KW  - recursive utility
KW  - REITs
KW  - Haushalt
KW  - Nutzenmaximierung
Y1  - 2009
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/6244
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-62771
PB  - Univ., Fachbereich Wirtschaftswiss.
CY  - Frankfurt am Main
ER  -