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

Fougère, Denis; Poulhes, Mathilde

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

CEPR Discussion Paper No. DP9213

27 Pages Posted: 1 Feb 2013

See all articles by Denis Fougère

Denis Fougère

National Center for Scientific Research (CNRS); CNRS and SCIENCES PO PARIS; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Mathilde Poulhes

affiliation not provided to SSRN

Date Written: November 2012

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.

Keywords: housing, mortgage debt, portfolio choice, property value

JEL Classification: C36, D14, G11, R21

Suggested Citation: Suggested Citation

Fougere, Denis and Fougere, Denis and Poulhes, Mathilde, The Effect of Housing on Portfolio Choice: A Reappraisal Using French Data (November 2012). CEPR Discussion Paper No. DP9213, Available at SSRN: https://ssrn.com/abstract=2210182