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


  • Fougère, Denis
  • Poulhes, Mathilde


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.

Suggested Citation

  • Fougère, Denis & Poulhes, Mathilde, 2012. "The Effect of Housing on Portfolio Choice: A Reappraisal Using French Data," CEPR Discussion Papers 9213, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9213

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    References listed on IDEAS

    1. Grossman, Sanford J & Laroque, Guy, 1990. "Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods," Econometrica, Econometric Society, vol. 58(1), pages 25-51, January.
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    Cited by:

    1. Thomas Michielsen & Remco Mocking & Sander van Veldhuizen, 2015. "Home Ownership and Household Portfolio Choice," CPB Discussion Paper 318, CPB Netherlands Bureau for Economic Policy Analysis.
    2. D. Fougère & R. Lecat & S. Ray, 2017. "Real Estate and Corporate Investmeent: Theory and Evidence of Heterogeneous Effects Across Firms," Working papers 626, Banque de France.
    3. A. Bergeaud & S.Ray, 2017. "Adjustment Costs and Factor Demand: New Evidence From Firms’ Real Estate," Working papers 641, Banque de France.

    More about this item


    housing; mortgage debt; portfolio choice; property value;

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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