Portfolio Choice in the Presence of Housing
نویسندگان
چکیده
I show that investment in housing plays a crucial role in explaining the patterns of cross sectional variation in the composition of wealth and the level of stockholdings observed in portfolio composition data. Due to investment in housing, younger and poorer investors have limited ̄nancial wealth to invest in stocks, which reduces the bene ̄ts of equity market participation. House price risk crowds out stockholdings, and this crowding out e®ect is larger for low ̄nancial net-worth. In the model as in the data leverage is positively correlated with stockholdings. JEL classi ̄cation: G11.
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