Den langsigtede investors optimale porteføljevalg med ... - DN Erhverv

Even though the two models generate somewhat different results, it does not mean that either
of them are wrong, since they are based on two different motivations – Cocco seeking to
explain actual behaviour, and the extended model trying to predict optimal behaviour.
Further examinations
One possible extension of the paper is to do a thorough development of the traditional model.
In this paper, only an intuitive extension has been done, and the extended model is therefore
not based on a statistical analysis. To fully conclude that the inclusion of the housing asset
actually solves the puzzles from traditional theory, one would have to base the conclusions on
a statistically correct model.
Also, when comparing the Cocco model with the extended model, real investors, specifically
from the Danish market, should be used, instead of fictive ones. This would make the results
much more reliable, since real investors can hold different values for the specific capital
elements from the ones used in this paper. The use of real investors, together with a
statistically correct extended model, would generate the most reliable results.
Finally, all of the models discussed in this paper, except from Yao/Zhang (2005), ignore the
possibility of the investor renting his housing services. Since this would keep the housing
asset from constraining the investor’s liquid capital, inclusion of a rental market would
probably change the optimal portfolio shares for many investors. However, Yao/Zhang
concludes that the inclusion of a rental market only affects very old or very poor investors.
Content of the paper
The paper is organized as follows: Chapter 1 introduces the paper’s motivation, as well as its
restrictions and content. In chapter 2, the traditional model for portfolio allocation is
explained. Chapter 3 discusses the three existing models including housing – Cocco (2002),
Flavin/Yamashita (1998), and Yao/Zhang (2005). Chapter 4 intuitively extends the traditional
model with the housing asset, as well as mortgage value. Chapter 5 compares Cocco from
chapter 3 with the extended model from chapter 4, by examining the stock shares the two
models predict for a selection of fictive investors. In chapter 6, results and conclusions are
discussed.