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Owner-Occupied Housing and Demand for Risky Financial Assets: Some Finnish Evidence

Author

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  • Tuukka Saarimaa

    (Department of Economics and Business Administration, University of Joensuu, Finland)

Abstract

This paper studies the linkage between owner-occupied housing and portfolio choice. Using a theoretical simulation model with Finnish asset return data we find that a leveraged position in housing has a clear negative effect on the share of stocks in a mean-variance efficient portfolio. The second part of the paper studies how owner-occupied housing actually affects households’ financial portfolios using Finnish household data. The main result indicates that the more valuable house a homeowner resides in, at a given level of net wealth, the less likely it is to own stocks. However, it seems that housing has only a small effect if any on the share of financial assets a household invests in stocks conditional on stockholding.

Suggested Citation

  • Tuukka Saarimaa, 2008. "Owner-Occupied Housing and Demand for Risky Financial Assets: Some Finnish Evidence," Finnish Economic Papers, Finnish Economic Association, vol. 21(1), pages 22-38, Spring.
    • Handle: RePEc:fep:journl:v:21:y:2008:i:1:p:22-38
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    References listed on IDEAS

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    3. Yunker, James A. & Melkumian, Alla A., 2010. "The effect of capital wealth on optimal diversification: Evidence from the Survey of Consumer Finances," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(1), pages 90-98, February.
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    5. Arrondel, L. & Savignac, F., 2009. "Stockholding: Does housing wealth matter?," Working papers 266, Banque de France.
    6. Jiandong Li & Jianmei Zhao, 2019. "How Housing Affects Stock Investment—An SEM Analysis," Economies, MDPI, vol. 7(1), pages 1-11, March.

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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • 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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