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Do more financially literate households invest less in housing? Evidence from Italy

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  • Riccardo Calcagno
  • Maria Cesira Urzì Brancati

Abstract

Using the Bank of Italy’s Survey of Household Income and Wealth (SHIW) covering a 5-year panel, we measure the impact of the degree of households’ financial literacy on their portfolio imbalance towards housing investment. We find that households with higher levels of financial literacy hold a relatively lower share of illiquid wealth, and the results are more pronounced at older ages, when according to the lifecycle hypothesis they are meant to decumulate their assets. Results appear robust to different specifications of the dependent variable and potential endogeneity of financial literacy.

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Bibliographic Info

Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 297.

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Length: 26 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:cca:wpaper:297

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Keywords: financial literacy; intertemporal consumer choice; housing; portfolio choice;

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  1. Loriana Pelizzon & Guglielmo Weber, 2007. "Efficient Portfolios when Housing Needs Change over the Life-Cycle," "Marco Fanno" Working Papers 0037, Dipartimento di Scienze Economiche "Marco Fanno".
  2. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Financial literacy and retirement preparedness: Evidence and implications for financial education programs," CFS Working Paper Series 2007/15, Center for Financial Studies (CFS).
  3. Davidoff, Thomas, 2006. "Labor income, housing prices, and homeownership," Journal of Urban Economics, Elsevier, vol. 59(2), pages 209-235, March.
  4. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, Econometric Society, vol. 46(1), pages 69-85, January.
  5. Marjorie Flavin & Takashi Yamashita, 2002. "Owner-Occupied Housing and the Composition of the Household Portfolio," American Economic Review, American Economic Association, vol. 92(1), pages 345-362, March.
  6. Dan Andrews & Aida Caldera Sánchez, 2011. "Drivers of Homeownership Rates in Selected OECD Countries," OECD Economics Department Working Papers 849, OECD Publishing.
  7. Fornero, Elsa & Monticone, Chiara, 2011. "Financial literacy and pension plan participation in Italy," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 10(04), pages 547-564, October.
  8. Chiuri, Maria Concetta & Jappelli, Tullio, 2008. "Do the elderly reduce housing equity? An international comparison," CFS Working Paper Series 2008/20, Center for Financial Studies (CFS).
  9. Brueckner, Jan K, 1997. "Consumption and Investment Motives and the Portfolio Choices of Homeowners," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 15(2), pages 159-80, October.
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