Risk attitude, perceived returns and investment choice in New Zealand

Why do New Zealanders invest overwhelmingly in housing and not in shares? This paper adopted a psychological approach to examine the question. Study 1 investigated whether the relatively high level of New Zealand ownership of housing might stem from risk aversion. A sample of New Zealanders was more likely to prefer housing investment than a Hong Kong sample, but there were no differences in Investment Risk Attitude although this variable was positively correlated with share investment in both samples. Study 2 looked at how New Zealanders perceived past rates of return on different investments and found a tendency to overestimate the returns from housing. They showed a similar pattern for their expectations of future returns. However, the estimates of returns were very variable and the estimates of returns from housing were not strongly related to investment choice. Keywords: investment; housing; risk attitude; shares; perceived return
New Zealanders save, overwhelmingly, by investing in housing. New Zealand economists who have looked at this pattern have concluded that it is not in the interests of the country or, [...]