Real Estate and its Role in Household Portfolio Choice

39 Pages Posted: 1 Aug 2003 Last revised: 23 Oct 2012

See all articles by Cornelia Kullmann

Cornelia Kullmann

University of British Columbia - Faculty of Commerce

Stephan Siegel

University of Washington - Michael G. Foster School of Business; CESifo

Date Written: November 1, 2005

Abstract

We empirically examines the financial portfolio choice of households as a function of their exposure to real estate risk as a possible background risk. Using Panel Study of Income Dynamics data from 1984 to 2001, our estimation results control for sample selection and unobservable time-invariant heterogeneity in an environment of non-strictly exogenous explanatory variables. Our analysis finds that larger real estate exposure is correlated with a lower likelihood of stock market participation and with reduced holdings of stocks and other risky financial assets in households' financial asset portfolios. We also measure the variability of homeowners' house values and provide evidence that it is also associated with lower stock market participation and, conditional on participation, lower equity investments.

Previous version titled "Real Estate and its Role in Asset Allocation"

Suggested Citation

Kullmann, Cornelia and Siegel, Stephan, Real Estate and its Role in Household Portfolio Choice (November 1, 2005). EFA 2003 Annual Conference Paper No. 918; Sauder School of Business Working Paper. Available at SSRN: https://ssrn.com/abstract=424322 or http://dx.doi.org/10.2139/ssrn.424322

Cornelia Kullmann (Contact Author)

University of British Columbia - Faculty of Commerce ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-6975 (Phone)
604-822-8521 (Fax)

HOME PAGE: http://finance.commerce.ubc.ca/people/kullmann/

Stephan Siegel

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

HOME PAGE: http://faculty.washington.edu/ss1110/

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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