Households Expectations and Investing in Safe and Risky Financial Assets

Silvo Dajcman ()
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Silvo Dajcman: University of Maribor, Faculty of Economics and Business, Slovenia

Czech Journal of Economics and Finance (Finance a uver), 2020, vol. 70, issue 5, 431-460

Abstract: Drawing upon data from the European Commission’s consumer survey, this paper examines how four types of household expectations affect household financial portfolio decisions in the three largest euro area countries: Germany, France, and Italy. Focus is placed on the dynamic response of the shares of safe (currency and transferable deposits) and risky (equity and investment fund shares) financial assets in relation to the total value of financial assets held by the household sector to the shocks in expectations. The results illustrate that expectations are an important determinant of household financial portfolio decisions. In general, in response to improved expectations, households increase the share of risky assets and reduce the share of safe assets. However, country and expectations-type specific differences were observed. The effects of income, prices level, deposit rate and stock price shocks on the household financial portfolio are also documented and compared and the economic policy and financial industry implications of the results are discussed.

Keywords: household expectations; household financial portfolio; safe assets; risky assets (search for similar items in EconPapers)
JEL-codes: D1 D84 G11 G51 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:70:y:2020:i:5:p:431-460

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