Household portfolio efficiency in korea

Abstract

Household portfolio includes house asset, which is extremely illiquid and has a high portion among the portfolio. Household portfolio asset allocation should consider this asset for the efficiency. In other words, portfolio assets should be allocated under the condition where the investment weight for house is fixed. In this thesis, I want to see how many of sample household portfolios in Korea are efficient. For the study, we set two analysis period for the study based on the households’portfolio formation date, as former 5 years from the formation and next 5 years from the formation. Through the former 5 years data, I will study how household portfolios are efficiently formed based on the historical data. From the next 5 years data, I will study how the household portfolios performed during the next 5 years from the formation. For the methodology, I first find optimal portfolio for the constrained case. Then, I will compare the Sharpe ratios of household portfolios and the optimal portfolio, to check the efficiency.