Wealth Shocks and Portfolio Choice

Dimitris Christelis, Dimitris Georgarakos, Tullio Jappelli () and Geoff Kenny

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We use new euro area representative data from the Consumer Expectations Survey (CES) to elicit household-specific propensities to invest and consume out of positive wealth shocks. Using a randomized assignment of hypothetical lottery gains ranging from 5,000 to 50,000 euros and a realistic menu of consumption, saving and asset choices, we estimate the causal effect of wealth shocks on risky asset ownership and conditional asset shares. Wealth shocks have a positive effect on stockholding (about a 10 percentage points increase for the largest wealth shock). The majority of households in the sample do not participate in the stock market, even after a large increase in wealth. The conditional asset share invested in stocks does not depend on the size of wealth shocks, with the small exception of very high values of the latter, for which the conditional risky asset share slightly increases. This result is consistent with the notion that preferences are characterized by constant relative risk aversion for the vast majority of risky asset investors.

Keywords: Household finance; Stock market participation; Risk aversion; Consumer Expectations Survey. (search for similar items in EconPapers)
JEL-codes: D14 G11 G51 (search for similar items in EconPapers)
Date: 2022-09-13
New Economics Papers: this item is included in nep-dcm, nep-eec, nep-fmk and nep-upt
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Wealth shocks and portfolio choice (2025)
Working Paper: Wealth Shocks and Portfolio Choice (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:652

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