Lie Flat after Winning the Rat Race: Housing Wealth and Trading Activity
60 Pages Posted: 30 Jul 2022 Last revised: 13 Sep 2023
Date Written: May 10, 2023
Abstract
Utilizing positive quasi-random shocks to local housing prices in Shanghai, we show that stock investors who experienced housing wealth gains traded less actively, took less risk, and spent less effort trading. We confirm the effect of housing wealth on investors’ trading behavior in a national sample and find that the effect is stronger for less wealthy, male, and middle-aged investors and following moderate historical changes in housing price. Our findings suggest that housing wealth affects investors’ trading activities through wealth aspiration and highlight the importance of understanding investors’ trading behavior in light of intertemporal variations in personal wealth.
Keywords: excessive trading, reference-dependent preference, housing price, stock portfolio
JEL Classification: G41, G11, D15, G51
Suggested Citation: Suggested Citation