DP9213 The Effect of Housing on Portfolio Choice: A Reappraisal Using French Data

Author(s): Denis Fougère, Mathilde Poulhes
Publication Date: November 2012
Keyword(s): housing, mortgage debt, portfolio choice, property value
JEL(s): C36, D14, G11, R21
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9213

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.