The impact of housing wealth on household financial investment

This paper exploits the discontinuity in housing size resulting from China's housing policies to identify the effect of housing wealth on household financial investment using a Regression Discontinuity (RD) design. We find that an unexpected appreciation in housing wealth significantly increased financial investment both on the extensive and intensive margins. Further investigation provides evidence for two potential mechanisms, including the pure wealth effect and the risk-buffering role of housing wealth. The minimal importance of the borrowing collateral channel can be attributed to the immature mortgage market in China.