• Household financial fragility significantly reduces the rationality and diversification of financial asset portfolios. • Housing investment serves as a positive mediating mechanism in household portfolio allocation. • The wealth effect and asset-allocation effect of housing investment outweigh its crowding-out effect on financial asset holdings. • The negative effect of financial fragility on portfolio optimization exhibits pronounced regional and financial-health heterogeneity across Chinese households.
Liu et al. (Fri,) studied this question.