Disentangling the Effect of Home Ownership on Household Stock-holdings: Evidence from Japanese microdata

         
Author Name IWAISAKO Tokuo (Hitotsubashi University) / ONO Arito (Chuo University) / SAITO Amane (Government Pension Investment Fund) / TOKUDA Hidenobu (United Nations Economic Commission for Latin America and the Caribbean)
Creation Date/NO. February 2019 19-E-007
Research Project Study Group on Corporate Finance and Firm Dynamics
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Abstract

Using Japanese household survey micro data for the period 2000–2015, this study examines the effects of home ownership on household stock-holdings. To disentangle the effect of property value and mortgage debt on households' stock-holdings as a share of their liquid financial assets, we apply the instrumental variable approach proposed by Chetty et al. (2017), which employs differences in average house price indices across regional housing markets in the year in which household portfolios are measured and those in the year in which the house was purchased. Our estimates suggest that an exogenous increase in property value (while holding mortgage debt constant) is associated with an increase in stock-holdings as a share of liquid financial assets, while an increase in mortgage debt (while holding property value constant) is associated with a decrease. We also find that a simultaneous increase in property value and mortgage debt (while holding home equity constant) has no effect on households' stock-holdings but is associated with an increase in mortgage debt repayment.