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.