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Discussion Paper Details

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Title: The Effect of Housing on Portfolio Choice: A Reappraisal Using French Data

Author(s): Denis Fougère and Mathilde Poulhes

Publication Date: November 2012

Keyword(s): housing, mortgage debt, portfolio choice and property value

Programme Area(s): Financial Economics

Abstract: Chetty and Szeidl (2012) propose to estimate the effect of housing on portfolio choice by distinguishing between the effect of mortgage debt and the effect of home equity and by endogenizing these two variables. When replicating their study with French data, we obtain similar qualitative results: an increase in mortgage debt(respectively, in home equity) reduces (respectively, raises) stockholding. However, while in the US the wealth effect of holding more home equity is cancelled out by the risk effect of owning a more expensive house, in France the wealth effect dominates the risk effect. We propose some explanations for this discrepancy.

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Bibliographic Reference

Fougère, D and Poulhes, M. 2012. 'The Effect of Housing on Portfolio Choice: A Reappraisal Using French Data'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9213