Household Portfolio Selection and Housing Market

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I analyzed why Japanese households invest in less risky financial assets(stocks and bonds). Their financial portfolio selections are linked to the non-liquidity of the owner-occupied housing in the resale housing market. In Japan, most Japanese households own houses, but the circulation of secondhand housing is very low. In fact, secondhand housing transactions make up only about 10% of the total market, which means selling owner-occupied housing is not easy. On the other hand, in America and many European countries, the shares are over 70%(used houses are the most common transactions), and other risky financial asset shares in household portfolios are also high. I have shown how the liquidation risk of the owner-occupied housing affects household portfolio allocation by using the theoretical model and econometric analysis of the Japanese household data, and answered an important question about Japanese household risk-averse portfolio behavior.