The Effect Of Housing On Household Financial Portfolio Choice In China

In recent years,more and more attention has been paid to the allocation of household assets in China.On the one hand,the government encouraged residents to "increase property income" in the 12 th Five-Year Plan outline of 2011.In the meantime,the return from financial investment has become the second largest source of income for Chinese households by 2015.Obviously,the importance of financial assets has been constantly emphasized.On the other hand,there still remains many unreasonable phenomena in the allocation of household assets in China,such as the high proportion of housing,excessive savings,low share of risky assets such as stocks and lack of variety.Also,considering the special environment of China's real estate market and the continual one-way rise of housing price,families are enthusiastic about purchasing housing out of their own living and investment needs.Therefore,it is necessary to make a comprehension of housing's impact on household financial asset allocation.Using the CHFS 2013 data,the paper firstly makes a statistical analysis of the ownership and proportion of housing asset and the holding and composition of financial assets,preliminarily understanding the status of household asset allocation.Subsequently,from a mathematical point of view we make use of mean-variance utility model to explore the relationship between the optimal share in stock and housing burden.Finally,from a realistic point of view we put forward hypothesis based on literature,statistical analysis and model prediction.And using Tobit and OLS models to verify the influencing mechanism of housing on the actual share in stock,measured by housing appreciation and housing constraint characteristics.At the same time,empirical analysis also reveals the difference in effects of stock allocation share between two types of households holding houses for different demand.The main results of the paper are as follows: Firstly,the positive "wealth effect" of housing appreciation generally exists in all households with property,as well as under the housing financial constraints the effect first dominated by the positive "asset allocation effect" then dominated by the negative "crowd-out effect".Secondly,in contrast with the consumer-demand households,the investment-demand households' allocation of stock are less sensitive to housing appreciation,but more affordable to housing financial constraints and higher requirements for asset allocation,so the "asset allocation effect" is stronger.Third,housing loans have a positive investment leverage effect on household's allocation in stock,and the effect is stronger in investmentdemand households.Empirical conclusion is robust when introducing instrumental variable to solve the endogenous problem and replacing the dependent variable to solve the stability problem.Finally,based on the summary of the conclusions,this paper provides relevant policy recommendations.