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Research Seminars & Workshops @ IRES

Dr Liao Wen-Chi
Department of Real Estate, National University of Singapore

Risk Attitude and Housing Wealth Effect


6 April 2011 (Wednesday)


3.00 pm - 5.00 pm


RMI Executive Seminar Room
21 Heng Mui Keng Terrace, Level 4


This paper examines whether the wealth effect on consumption change due to house price appreciation depends upon households’ attitudes toward risk. The empirical investigation makes use of data from the U.S. Consumer Expenditure Survey. Firstly, households’ investment behaviors on risky assets are studied and a measure of their risk attitudes is identified. Then, a pseudo panel dataset is constructed through grouping households by age and risk attitude, and the responses of households’ consumption changes to house price fluctuations are estimated. The basic results are consistent with the findings of Campbell and Cocco. (2007). More importantly, we find a dependency between the housing wealth effect and household risk attitude; households who are less risk averse experience greater consumption changes in response to house price increases. A simple model is provided to demonstrate the theoretical possibility and economics of our empirical finding.

For full paper, download here

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