Does Collateral Value Affect Asset Prices? Evidence from a Natural Experiment in Texas

@inproceedings{Zevelev2021DoesCV,
  title={Does Collateral Value Affect Asset Prices? Evidence from a Natural Experiment in Texas},
  author={Albert A. Zevelev},
  year={2021}
}
Does the ability to pledge an asset as collateral, after purchase, affect its price? This paper identifies the impact of collateral service flows on house prices, exploiting a plausibly exogenous constitutional amendment in Texas that legalized home equity loans in 1998. The law change increased Texas house prices 4%; this is price-based evidence that households are credit-constrained and value home equity loans to facilitate consumption smoothing. Prices rose more in locations with inelastic… Expand

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