Household Portfolios and Monetary Policy

Raslan Alzuabi (), Sarah Brown (), Alexandros Kontonikas () and Alberto Montagnoli ()
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Raslan Alzuabi: Department of Economics, University of Sheffield, UK
Alberto Montagnoli: Department of Economics, University of Sheffield

No 2020001, Working Papers from The University of Sheffield, Department of Economics

Abstract: We show that expansionary monetary policy is associated with higher household portfolio allocation to high risk assets and lower allocation to low risk assets, in line with “reaching for yield” behaviour. Our findings are based on analysis of US household level panel data using two measures of monetary policy shifts over the period 1999-2007. We also show that the impact of monetary policy changes is stronger for active investors. In addition, our hurdle model estimates reveal that monetary shocks strongly affect the decision to hold high risk assets, but not the decision to hold low risk assets. Finally, our results highlight the role of self-reported risk attitudes as well as that of mortgage-holder status in affecting the response of household portfolios to monetary policy changes.

Keywords: Household Financial Portfolio Allocation; Monetary Policy (search for similar items in EconPapers)
JEL-codes: D14 E52 G11 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2020-01
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2020001

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