Housing Investment, Stock Market Participation and Household Portfolio choice: Evidence from China's Urban Areas

TL;DR

This study examines how housing investment influences household stock market participation and portfolio choices in China's urban areas, revealing that larger housing investments increase participation but decrease stockholding proportion, with implications for financial literacy and market development.

Contribution

It provides empirical evidence on the complex relationship between housing investment and stock market participation in China, accounting for endogeneity and risk attitudes.

Findings

Larger housing investment encourages stock market participation.

Increased housing investment reduces the proportion of stockholdings.

Housing market growth does not necessarily promote stock market development.

Abstract

This paper employs the survey data of CHFS (2013) to investigate the impact of housing investment on household stock market participation and portfolio choice. The results show that larger housing investment encourages the household participation in the stock market, but reduces the proportion of their stockholding. The above conclusion remains true even when the endogeneity problem is controlled with risk attitude classification, Heckman model test and subsample regression. This study shows that the growth in the housing market will not lead to stock market development because of lack of household financial literacy and the low expected yield on stock market.