This second of two related papers in this Journal, reviews empirical evidence available from the literature on the problem of household's optimal portfolio when owner‐occupied housing is included in the list of available assets, namely the risk‐return performance of residential investment, and its usefulness in efficient mixed‐asset portfolios. The risk‐return characteristics of the housing asset is highly dependent on the type of perspective under analysis (household or institutional investor's perspective) and therefore, the two housing investment approaches could lead to different conclusions about the role of housing investment in an portfolio context. The consumption demand for housing together with the markets imperfections place serious constraint on the household's portfolio problem.
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