Household portfolios and financial literacy: The flight to delegation

Sarah Brown (), Alexandros Kontonikas (), Alberto Montagnoli, Harry Pickard and Karl Taylor
Additional contact information
Sarah Brown: Department of Economics, University of Sheffield, UK; and IZA Bonn
Alexandros Kontonikas: Essex Business School, University of Essex
Alberto Montagnoli: Department of Economics, University of Sheffield, UK

No 2023005, Working Papers from The University of Sheffield, Department of Economics

Abstract: In this paper we analyse the asset allocation of European households, focusing on developments during the period that followed the recent twin financial crises. We examine whether “search for yield” materialises outside financial institutions and whether the degree of financial literacy plays a role. We consider a wider set of alternatives to the safe assets by incorporating mutual funds to the standard set of stocks and bonds. We provide novel evidence which suggests that the “search for yield” during the post-crisis period of low interest rates took place not by raising the direct holdings of stocks and bonds, but rather indirectly through higher mutual funds’ holdings, in line with a “flight to delegation”. Importantly, this behaviour is strongly linked to the level of financial literacy, with the most literate households displaying significantly higher use of mutual funds.

Keywords: Asset allocation; Financial literacy; Delegation (search for similar items in EconPapers)
JEL-codes: E2 E44 G11 G51 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2023-02
New Economics Papers: this item is included in nep-ban, nep-eec, nep-fle and nep-fmk
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https://www.sheffield.ac.uk/economics/research/serps First version, February 14 2023 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2023005

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