Are Homeowners Irrational Investors? The Effect of Housing Tenure on Household Investment Allocation in the United Kingdom

Franz Fuerst and Marco Felici

ERES from European Real Estate Society (ERES)

Abstract: The importance of housing tenure on individuals’ behaviour is widely recognised and studied. Arguably, one aspect that is crucial, with wide-ranging implications for macroeconomic fluctuations and possibly for economic inequality, is the effect of housing on the portfolio composition of households, and more specifically how the fact of being a homeowner, as compared to a renter or a mortgagor, affects portfolio efficiency. We first explore this question theoretically, using a mean-variance framework adjusted for the presence of housing in the portfolio. We then turn to UK data from the Wealth and Assets Survey to confirm empirically the predictions of the model: the five waves of the survey allow to break down households' portfolios in detail, as well as to account for a wide range of covariates and for individual unobserved heterogeneity.

Keywords: Household microdata; Household portfolio choice; Liquid assets; Microeconomics of housing (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2019-01-01
New Economics Papers: this item is included in nep-eur and nep-ure
References: Add references at CitEc
Citations:

Downloads: (external link)
https://eres.architexturez.net/doc/oai-eres-id-eres2019-326 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2019_326

Access Statistics for this paper

More papers in ERES from European Real Estate Society (ERES) Contact information at EDIRC.
Bibliographic data for series maintained by Architexturez Imprints ().