A Discrete Choice Analysis of the Household Shares of Risky Assets

Graciela Sanromán
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Graciela Sanromán: Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República and CEMFI

No 702, Documentos de Trabajo (working papers) from Department of Economics - dECON

Abstract: This paper studies household decisions about participation and investment in risky financial markets, using a unique panel dataset of Italian households. Micro data show that households are enormously heterogeneous in their financial decisions. Most of this heterogeneity is associated with the choice of participating in risky financial markets, and with time persistence in this decision. We postulate a model of portfolio choice with two types of financial assets, risky and riskless, and costs of participation. We use a flexible approach to estimate the conditional probability distribution function of the household shares of risky assets. We find that both household the cash-on-hand/non- financial-income ratio and non-financial-income have a positive e¤ect on the household shares of risky financial assets, mainly due their influence on the household likelihood of participating in the risky financial assets. The evidence also shows that the lagged household share of risky asset is an important determinant of the household choice. Nevertheless, we find that the age of the household’s head has not statistical relevance.

Keywords: household portfolio; longitudinal data; discrete choice. (search for similar items in EconPapers)
JEL-codes: C25 D12 E21 G11 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2002-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ude:wpaper:0702

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