We investigate the relationship between housing wealth, property taxes, and elderly labor supply using longitudinal data from the Health and Retirement Survey spanning the recent boom/bust housing cycle. When combined with MSA-specific house price indexes, the data provide plausibly exogenous variation in housing wealth, identified through within-MSA renter/homeowner comparisons. Our findings suggest that elderly households respond to variation in housing wealth and property taxes in the predicted opposing directions, that wealth influences labor supply to a lesser extent than factors like health and marital status, and that the effect of housing wealth on labor supply varies by gender and age.

Revisiting the framework of (Barillas, Francisco, and Jay Shanken, 2018, Comparing asset pricing models, The Journal of Finance 73, 715–754). BS henceforth, we show that the Bayesian marginal likelihood‐based model comparison method in that paper is unsound : the priors on the nuisance parameters across models must satisfy a change of variable property for densities that is violated by the Jeffreys priors used in the BS method. Extensive simulation exercises confirm that the BS method performs unsatisfactorily. We derive a new class of improper priors on the nuisance parameters, starting from a single improper prior , which leads to valid marginal likelihoods and model comparisons. The performance of our marginal likelihoods is significantly better, allowing for reliable Bayesian work on which factors are risk factors in asset pricing models.