Working Paper: CEPR ID: DP9213
Authors: Denis Fougre; Mathilde Poulhes
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 Codes: C36; D14; G11; R21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in mortgage debt (G21) | decrease in stockholding (E21) |
| increase in home equity (G51) | increase in stockholding (G31) |
| mortgage debt (G21) | stock share of liquid wealth (G19) |
| home equity (G51) | stock share of liquid wealth (G19) |