Financial Returns to Household Inventory Management

Scott Baker, Stephanie Johnson and Lorenz Kueng

No 20-114, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Households tend to hold substantial amounts of non-financial assets in the form of inventory. Households can obtain significant financial returns from strategic shopping and optimally managing these inventories of consumer goods. In addition, they choose to maintain liquid savings - household working capital - not just for precautionary motives but also to support this inventory management. We demonstrate that households earn high returns from inventory management at low levels of inventory, though returns decline rapidly as inventory levels increase. We provide evidence using scanner and survey data that supports this conclusion. High returns from inventory management that are declining in wealth offer a new rationale for poorer households not to participate in risky financial markets, while wealthier households invest in both financial assets and working capital.

Keywords: household working capital; stock market participation; financial returns; inventory; stockpiling (search for similar items in EconPapers)
JEL-codes: D11 D12 D13 D14 E21 G11 G51 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2020-10
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

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https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3677084 (application/pdf)

Related works:
Journal Article: Financial returns to household inventory management (2024)
Working Paper: Financial Returns to Household Inventory Management (2020)
Working Paper: Financial Returns to Household Inventory Management (2020)
Working Paper: Financial Returns to Household Inventory Management (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp20114

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