in The Review of Financial Studies
March 2014; p ublished online October 2013 .
Journal Article. Subjects: Economics; Mathematical Methods; Programming Methods; Mathematical and Simulation Modelling; Household Behaviour and Family Economics; Intertemporal Choice and Growth; Household Analysis. 26414 words.
We develop and solve a model of optimal portfolio choice with transaction costs and predictability in house prices. We model house prices using a process with a time-varying expected growth...