%0 PDF %T The Effect of Homeownership on Households' Financial Portfolio Choices: Evidence from the Panel Study of Income Dynamics. %A Wang, Zuoling. %8 2017-04-24 %R http://localhost/files/nc581011q %X Abstract: This paper aims to explore the impact of homeownership on households' financial portfolio choices. Most current theoretical researchers of household finance find that there is a negative effect of housing on the financial assets. However there is no clear conclusion on empirical research. Some research indicates a positive relationship between housing and holdings of financial assets. Others do not find a strong relationship. Chetty and Szeidl (2012) explain possible reasons that lead to this discrepancy. First, since both the home tenure choice and financial investment choice are endogenous, directly regressing portfolio choices on tenure choice and housing value would be strongly biased. Second, it is important to distinguish and isolate the effects of home equity wealth and mortgage debt on portfolio choices, since home equity wealth and mortgage debt play opposite roles and have opposite-signed effects on financial investment choices. Following Chetty and Szeidl's analysis, I conduct an empirical study using data from the Panel Study of Income Dynamics. I develop a two stage least square estimation using two instrumental variables from cross-sectional analysis and a Difference-in-Difference estimation using panel data in 1999-2009. I find that increases in mortgage debt reduce stock holding and raise safe asset holding. On average, a household with 10% increase in mortgage debt has a 3% lower portfolio share of stocks from the least square analysis. However, the DID estimation does not give a significant effect of housing on both stock holding and safe asset holding. This may be caused by the small sample sizes used in estimation.; Thesis (M.S.)--Tufts University, 2013.; Submitted to the Dept. of Economics.; Advisor: Yannis Ioannides.; Committee: Jeffrey Zabel.; Keyword: Economics. %[ 2022-10-12 %9 Text %~ Tufts Digital Library %W Institution