Owner-occupied housing and investment in stocks: an empirical test

Yamashita, Takashi

doi:10.1016/s0094-1190(02)00514-4

Cited by 72 publications

(41 citation statements)

References 15 publications

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“…Flavin and Yamashita (2002) reported empirical evidence confirming the shift of household portfolios towards stocks over time, which is consistent with their model. Later empirical work has been less favorable, however, regarding the usefulness of the constrained mean-variance model as a descriptive device (see Yamashita (2003), Pelizzon and Weber (2006a, b)). This implies that many households do not realize the gains that would be possible if they were to adjust their portfolio optimally to their owner-occupied house (see Englund et al (2002) for computations of the gains conditional on housing consumption).…”

Section: Mean Variance Analysismentioning

confidence: 99%

Housing Wealth and Household Portfolios in an Ageing Society

Rouwendal

2009

De Economist

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SummaryHousing is one of the most important consumption goods, also for the elderly. For owner-occupiers, housing equity is moreover usually the most important asset in their investment portfolio, and hence, household wealth of the elderly is extremely sensitive to developments on the housing market. This panel paper surveys the literature on housing as a consumption good and asset category over the life cycle and moreover presents stylised facts on the housing market behavior of Dutch households over their life cycle. Although many of the issues discussed also occur in other countries, the Dutch housing market is used as a background o the review.

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Section: Mean Variance Analysismentioning

confidence: 99%

Housing Wealth and Household Portfolios in an Ageing Society

Rouwendal

2009

De Economist

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“…Exposure to real estate risk Following Yamashita (2003), Cocco (2004) and Yao and Zhang (2005) we take into account the homeowners'exposure to real estate risk by introducing the ratio of housing wealth to net worth, the ratio of housing debt to net wealth and the ratio of mortgage payments to income (h variables). 17 Assuming that …ve years ahead expected real income is y t+5 = y t (1 + g), the formula of the anticipated variance of household income is var(y t+5 ) = y 2 = g 2 y t 2 , where y t is current real income, g is the expected growth rate of real income and g 2 its variance.…”

Section: Unemployment Riskmentioning

confidence: 99%

“…Previous empirical investigations show that housing wealth crowds out stockholding (Cocco (2004), Saarimaa (2008), Yao and Zhang (2005), Yamashita (2003)). We estimate a similar model on French wealth data.…”

Section: Introductionmentioning

confidence: 96%

Stockholding: Does Housing Wealth Matter?

Arrondel

Savignac

2009

SSRN Journal

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The existence of an equity premium puzzle has been largely emphasized in the empirical literature: one observes low risky assets holding that the standard portfolio choice model (with expected and discounting utility and homothetic preferences) is not able to explain. Besides modi…cations of rationality assumptions, other changes have been introduced in the standard framework to account for this equity premium puzzle: the existence of transaction costs, liquidity constraints or other risks (e.g. risks associated with employment, income, health,). These background risks (i.e. risks that are unavoidable, exogenous and independent from the …nancial market risk) may lead households to reduce their stockownership in order to limit their global exposure to risk. Recent developments examine the role of housing on stockholding as another background risk. This paper analyses the empirical link between stockholding and housing wealth within this framework. We use the French wealth survey (Enquête Patrimoine 2004, Insee) that gives us detailed information on households portfolio, socio-demographic variables, and several measures of preference and exposition to various risks (income, unemployment, health, and business). We …nd that an increase in the housing to net wealth ratio crowds out stock market investment for a given total …nancial wealth: when facing real estate exposure to risk, households tend to moderate their global exposure to risk by limiting the share of their …nancial wealth invested in stocks. Among the other signi…cant determinants of the equity premium puzzle, we emphasize the role of transaction and information costs, the attitude toward risk and the exposition to various risks in hampering investments in stocks.

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“…In comparison to the above papers we address a different but related question, that is, what are the effects of a "consumption commitment" or homeownership constraint on consumption, asset allocation, welfare, and post retirement wealth. Flavin and Yamashita (2002) and Yamashita (2003) study the impact of the portfolio constraint imposed by the consumption demand for housing on an individual's optimal holdings of financial assets. In addition to a house, the individual can invest in T-Bills, T-Bonds, stocks, and borrow through a mortgage loan.…”

Section: Literature and Extensionsmentioning

confidence: 99%