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Coastal Real Estate Vibes: An Analysis of the Association Between Coastal Residential Ownership and the Resident Occupant’s Risk Tolerance

Author

Listed:
  • Leobardo Diosdado

    (Department of Accounting, Finance, and Business Law, College of Business, Texas A&M University-Corpus Christi, Corpus Christi, TX 78412, USA)

  • Matthew Jaramillo

    (Department of Economics and Finance, Nelson Rusche College of Business, Stephen F. Austin State University, Nacogdoches, TX 75962, USA)

  • Eugene Bland

    (Department of Accounting, Finance, and Business Law, College of Business, Texas A&M University-Corpus Christi, Corpus Christi, TX 78412, USA)

  • Christopher Wertheim

    (Department of Accounting, Finance, and Business Law, College of Business, Texas A&M University-Corpus Christi, Corpus Christi, TX 78412, USA)

Abstract

This study examines the association between the location, relative to the coast, of an individual’s primary residence and the homeowners’ risk tolerance. Utilizing data from the 2021 National Financial Capability Study and employing a probit model, we analyzed how varying risk tolerance levels affect the likelihood of owning a home in a coastal ZIP code. The respondent’s risk tolerance was classified as high, medium, or low according to their self-reported willingness to take financial risks. Our results suggest that individuals with lower risk tolerances are less likely to own a home within a coastal ZIP code. Specifically, homeowners with medium-risk tolerance are 2.91% less likely, and those with low-risk tolerance are 3.17% less likely to own a primary residence in a coastal ZIP code when compared to those with high-risk tolerance. These results are statistically and economically similar when using a logit model. These findings are both statistically significant and align with economic theory. The analysis also included various demographic and socioeconomic factors, finding that age, income, and certain employment statuses influence coastal homeownership. This research contributes to the understanding of home ownership location choices and risk tolerance. Our results provide policymakers with insights into the risk characteristics of individuals who prefer coastal areas as their primary residences. This information can inform future policy decisions by highlighting the societal and economic implications of regulations related to residential coastal development.

Suggested Citation

  • Leobardo Diosdado & Matthew Jaramillo & Eugene Bland & Christopher Wertheim, 2024. "Coastal Real Estate Vibes: An Analysis of the Association Between Coastal Residential Ownership and the Resident Occupant’s Risk Tolerance," JRFM, MDPI, vol. 17(11), pages 1-12, November.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:11:p:496-:d:1515297
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    References listed on IDEAS

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    1. Yao, Rui & Sharpe, Deanna L. & Wang, Feifei, 2011. "Decomposing the age effect on risk tolerance," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(6), pages 879-887.
    2. John Grable & Dee Warmath & Eun Jin Kwak, 2022. "An Assessment of the Association between Political Orientation and Financial Risk Tolerance," JRFM, MDPI, vol. 15(5), pages 1-16, April.
    3. Gutter, Michael S. & Fox, Jonathan J. & Montalto, Catherine P., 1999. "Racial differences in investor decision making," Financial Services Review, Elsevier, vol. 8(3), pages 149-162.
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