Homeownership and investment in risky assets

This paper uses the 1989 Survey of Consumer Finances to show that committed expenditures related to homeownership cause agents to hold their financial assets in a safe form. This work follows theoretical results by Fratantoni [5] which show that the mortgage commitment leads to reduced risky asset holding, and empirical results by Guise et al. [7] which show that agents with uncertain labor income hold fewer risky assets. I find that doubling the median homeowner's mortgage payment/income ratio leads to a 15% decrease in the risky share, (C) 1998 academic Press.