Housing Wealth Change And Portfolio Choice

This paper firstly constructs a Mean-Variance model to illustrate the impact of housing wealth appreciation on household portfolio choice,and empirically studies the impact of housing wealth change on portfolio choice and the possible mechanism by using the China Household Finance Survey(CHFS)data from 2013 and 2015.Different from the previous literature,this paper constructed the wealth change of the total housing assets between two years,excluding the endogenous wealth change brought by decoration or maintenance.And this paper also studies whether the wealth change of housing would affect the household portfolio choice through the channel of changing risk preference and financial literacy.After controlling for the fixed effects of cities or provinces and using instrumental variables,the study found that the wealth effect brought by rising housing wealth significantly increased the participation rate of the stock market,the stockholdings and the risk of the portfolio.After employing the interaction of land supply and urban housing price as the instrumental variables of housing wealth change,the empirical conclusion stays consistent.The wealth effect of housing on the younger,under educated,and men is more pronounced.I further found that housing wealth appreciation increased individual risk preference and attention to financial knowledge,but the housing wealth change affect portfolio choice mainly through changing household risk preference.The findings of this paper have deepened the understanding of the interaction between the real estate market and the financial market.And it plays an important role in formulating housing policies and understanding the impact of real estate market regulation policies on the economic life of individuals and families,and it helps to promote the stable development of the real estate market.