Return Expectations and Risk Aversion Heterogeneity in Household Portfolios

Alessandro Bucciol, Raffaele Miniaci and Sergio Pastorello ()
Additional contact information
Sergio Pastorello: University of Bologna

No 01/2015, Working Papers from University of Verona, Department of Economics

Abstract: We develop a structural econometric model to elicit household-specific expectations about future financial asset returns and risk attitudes by using data on observed portfolio holdings and self-assessed willingness to bear financial risk. Our framework assumes that household portfolios are subject to short-selling constraints in stocks and bonds, and that financial investment decisions are taken conditional on real estate and business wealth. We derive an explicit solution for the model, and estimate its parameters using the US Survey of Consumer Finances from 1995 to 2010. The results show that our modified mean-variance model fits the data adequately, and that the demographic, occupational and educational characteristics of the investors are relevant in shaping risk aversion and return expectations. In contrast, wealth, income, and past market performance have limited impacts on expectations and risk aversion.

Keywords: Household Finance; Risk Aversion; Expectations; Mean Variance Analysis; Truncated and Censored Models (search for similar items in EconPapers)
JEL-codes: C34 D14 D81 G11 (search for similar items in EconPapers)
Pages: 37
Date: 2015-01
New Economics Papers: this item is included in nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://dse.univr.it/home/workingpapers/wp2015n1.pdf First version (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Return expectations and risk aversion heterogeneity in household portfolios (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ver:wpaper:01/2015

Access Statistics for this paper

More papers in Working Papers from University of Verona, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Michael Reiter ().