Lie Flat after Winning the Rat Race: Housing Wealth and Trading Activity

60 Pages Posted: 30 Jul 2022 Last revised: 13 Sep 2023

See all articles by Yiqing Lü

Yiqing Lü

New York University (NYU) - New York University (NYU), Shanghai

Bin Zhao

Thammasat Business School

Ning Zhu

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF); Tsinghua University - PBC School of Finance

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

Lü, Yiqing and Zhao, Bin and Zhu, Ning, Lie Flat after Winning the Rat Race: Housing Wealth and Trading Activity (May 10, 2023). Available at SSRN: https://ssrn.com/abstract=4171811 or http://dx.doi.org/10.2139/ssrn.4171811

Yiqing Lü

New York University (NYU) - New York University (NYU), Shanghai ( email )

1555 Century Ave
Pudong
Shanghai, Shanghai 200122
China

HOME PAGE: http://www.yiqinglue.com/

Bin Zhao (Contact Author)

Thammasat Business School ( email )

2 Prachan Road
Pra Nakorn
Bangkok, Bangkok 10200
Thailand

Ning Zhu

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

Tsinghua University - PBC School of Finance

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

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