Homeownership and investment in risky assets in Europe

This study examines how housing influences households’ risky asset holdings in multiple European countries, using the 2004 Survey of Health, Ageing and Retirement in Europe (SHARE) data set. This research provides three major findings. First, homeowners in bank-based economies have a significantly lower probability of participating in the stock market, whereas in market-based economies, homeownership has no significant impact on this probability. Second, homeowners tend to invest a lower share of their financial assets in stocks compared to renters. Third, households with a higher home value to wealth ratio invest a lower share of financial assets in stocks in countries with more developed mortgage markets. In contrast, in countries with underdeveloped mortgage markets, households with a higher home value to wealth ratio invest a larger share of financial assets in stocks. The results of this study suggest that recognizing differences in financial market structures is crucial to understanding the relationship between housing investment and stock investment.