A portfolio selection framework for the houseowner

Abstract

In this paper the portfolio selection decision of the houseowner is considered in the usual two-parameter framework. It is assumed that houseownership may not be a consequence of wealth maximization alone and that houseowners may therefore subject themselves to certain financial constraints in order to own property. It is shown that portfolio selection decisions for houseowners are generally influenced by the relative size of the outstanding bond on the property as well as the relative value of the house. An empirical study over the 1978–1987 period demonstrates how the framework can be used to investigate portfolio selection decisions.