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Heterogeneity in asset allocation decisions: Empirical evidence from Switzerland

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  • Drobetz, Wolfgang
  • Kugler, Peter
  • Wanzenried, Gabrielle
  • Zimmermann, Heinz
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    Abstract

    We analyze the heterogeneity in asset allocation decisions of different investor groups in response to changes in the macroeconomic environment. Using a new data set that includes the monthly portfolio holdings of private, commercial, and institutional investors deposited with Swiss banks, we estimate the relationship between equity and bond holdings and common business cycle indicators. Regression analysis indicates that private investors do not systematically move from stocks into bonds by selling stocks to institutional investors and purchasing bonds from them in adverse macroeconomic states. A VAR-error correction framework including cointegration and error correction restrictions suggests that the investment behavior of commercial investors leads and private investors follow in their investment decisions only slowly over time. The asset allocation decisions of institutional investors are not affected by the actions of private and commercial investors. Our results refute a principle of "institutional irrelevance".

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    Bibliographic Info

    Article provided by Elsevier in its journal International Review of Financial Analysis.

    Volume (Year): 18 (2009)
    Issue (Month): 1-2 (March)
    Pages: 84-93

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    Handle: RePEc:eee:finana:v:18:y:2009:i:1-2:p:84-93

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    Web page: http://www.elsevier.com/locate/inca/620166

    Related research

    Keywords: Asset allocation Stock return predictability Business cycle Investor heterogeneity Vector error correction;

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    Cited by:
    1. Li, Bob & Boo, Yee Ling & Ee, Mong Shan & Chen, Cindy, 2013. "A re-examination of firm's attributes and share returns: Evidence from the Chinese A-shares market," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 174-181.
    2. Narayan, Paresh Kumar & Narayan, Seema & Popp, Stephan & D'Rosario, Michael, 2011. "Share price clustering in Mexico," International Review of Financial Analysis, Elsevier, vol. 20(2), pages 113-119, April.

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