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The Determinants of Household Risky Asset Holdings: Australian Evidence on Background Risk and Other Factors#

Buly Cardak () and Roger Wilkins ()

No 2008.05, Working Papers from School of Economics, La Trobe University

Abstract: We study the portfolio allocation decisions of Australian households using the relatively new Household Income and Labour Dynamics in Australia (HILDA) survey. We focus on household allocations to risky financial assets. Our empirical analysis considers a range of hypothesised determinants of these allocations. We find background risk factors posed by labour income uncertainty and health risk are important. Credit constraints and observed risk preferences play the expected role. A positive age gradient is identified for risky asset holdings and home-ownership is associated with greater risky asset holdings. A unifying theme for many of our empirical findings is the important role played by financial awareness and knowledge in determining risky asset holdings. Many non-stockholding households appear to lack the experience and financial literacy that might enable them to benefit from direct investment in stocks.

Keywords: Household Portfolios; Risky Asset Holdings; Background Risk; Credit Constraints; Financial Literacy EDIRC Provider-Institution: RePEc:edi:smlatau (search for similar items in EconPapers)
JEL-codes: D14 D81 G11 (search for similar items in EconPapers)
Date: 2008-09
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Related works:
Journal Article: The determinants of household risky asset holdings: Australian evidence on background risk and other factors (2009) Downloads
Working Paper: The Determinants of Household Risky Asset Holdings: Australian Evidence on Background Risk and Other Factors# (2008) Downloads
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