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Journal of Family and Economic Issues

, Volume 39, Issue 3, pp 494–508 | Cite as

Housing Valuation, Wealth Perception, and Homeowners’ Portfolio Composition

  • Francisco Camões
  • Sofia ValeEmail author
Original Paper
  • 188 Downloads

Abstract

This study explores the link between wealth perception from an appreciation of the residential property price and homeowners’ preference toward asset categories pooled by risk. Household survey data for Portugal were used to build shares of low, medium, and high risk assets representing fractions of household’s total wealth. Data showed incomplete household portfolios along with housing capturing the largest share of households’ wealth, in line with the literature on composition puzzles. The findings indicate robust empirical evidence that the rate of housing valuation is an indicator of households’ wealth perception. When the housing price appreciates with respect to its initial cost, households suffer an endowment effect and tend to increase diversity in their portfolio, expanding the holdings of safe deposits as they raise the share of high risk assets.

Keywords

Household finance Prospect theory Portfolio composition Homeownership Fractional logit models 

JEL Classification

C35 C58 D14 G11 

Notes

Funding

This work was supported by the Fundação para a Ciência e Tecnologia through the UID/GES/00315/2013 Grant.

Compliance with Ethical Standards

Ethical Approval

This article does not contain any studies with human participants performed by any of the authors.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Economics DepartmentISCTE-IULLisbonPortugal

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