56 Pages Posted: 17 Dec 2015 Last revised: 16 Dec 2016
Date Written: September 1, 2016
We evaluate the effect of personal characteristics and house prices on the choice made by servicemembers -- between 2001-09 -- among pension options that vary in the time-profile of cash flows. Servicemembers' personal discount rates (PDRs) vary through time and are larger during crisis years. Due to the collateral value of housing, an increase in house prices is associated with a lower propensity of servicemembers choosing immediate liquidity. The effect of house prices on pension choices is robust to controlling for macroeconomic factors including GDP growth, per capita income growth, changes in the state coincident index, unemployment rate, interest rates, stock returns and the net percentage of banks tightening loan standards.
Keywords: personal discount rate, time variation, macroeconomic variables, borrowing constraint, house price, collateral, housing, military pension
JEL Classification: D14, D91
Suggested Citation: Suggested Citation
Bennett, Benjamin and Gopalan, Radhakrishnan and Maurer, Thomas Andreas, The Collateral Value of Housing: Evidence from Servicemember Pension Choice (September 1, 2016). Available at SSRN: https://ssrn.com/abstract=2704043 or http://dx.doi.org/10.2139/ssrn.2704043