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Household portfolio allocation in the Netherlands: Saving accounts versus stocks and bonds

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Author Info

  • Hochgürtel, S.
  • Alessie, R.J.M.
  • Soest, A.H.O. van

    (Tilburg University, Center for Economic Research)

Abstract

This paper analyzes the portfolio structure of households in the Netherlands. It considers the allocation of financial wealth to two major asset categories, namely saving accounts on the one hand and stocks and bonds on the other hand. The latter category is considered to be more risky than the former. We analyze the impact of the overall level of wealth, the marginal tax rate, and other variables on the allocation between assets, using cross-section data drawn in 1988 that provide detailed information on the structure of household wealth, not only on ownership but also on the amounts of wealth held in the respective asset categories. The econometric specification is a trivariate tobit type model. One equation explains the total level of wealth, a second one explains individual threshold values below which no wealth is held. The third equation explains the share of wealth invested in stocks and bonds. The model is estimated using Full Information Maximum Likelihood. Limited information provided by the data (non reporting) is explicitly taken into account. Results show that wealth and the marginal tax rate are major determinants of the allocation between safe and risky assets.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1995-24.

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Date of creation: 1995
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Handle: RePEc:dgr:kubcen:199524

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Web page: http://center.uvt.nl

Related research

Keywords: Portfolio Investment; Bonds; Household Economics; Savings; Stocks; microeconomics;

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References

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  1. King, M A & Dicks-Mireaux, L-D L, 1982. "Asset Holdings and the Life-Cycle," Economic Journal, Royal Economic Society, vol. 92(366), pages 247-67, June.
  2. Paxson, Christina, 1990. "Borrowing Constraints and Portfolio Choice," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 535-43, May.
  3. Mervyn A. King & Louis Dicks-Mireaux, 1982. "Asset Holdings and the Life Cycle," NBER Working Papers 0614, National Bureau of Economic Research, Inc.
  4. Agell, Jonas & Edin, Per-Anders, 1990. " Marginal Taxes and the Asset Portfolios of Swedish Households," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(1), pages 47-64.
  5. Leape, Jonathan I., 1987. "Taxes and transaction costs in asset market equilibrium," Journal of Public Economics, Elsevier, vol. 33(1), pages 1-20, June.
  6. Sharpe, William F, 1991. " Capital Asset Prices with and without Negative Holdings," Journal of Finance, American Finance Association, vol. 46(2), pages 489-509, June.
  7. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1994. "Income Risk, Borrowing Constraints and Portfolio Choice," CEPR Discussion Papers 888, C.E.P.R. Discussion Papers.
  8. Mayshar, Joram, 1981. "Transaction Costs and the Pricing of Assets," Journal of Finance, American Finance Association, vol. 36(3), pages 583-97, June.
  9. Uhler, R S & Cragg, John G, 1971. "The Structure of the Asset Portfolios of Households," Review of Economic Studies, Wiley Blackwell, vol. 38(115), pages 341-57, July.
  10. Shorrocks, Anthony, 1982. "The Portfolio Composition of Asset Holdings in the United Kingdom," Economic Journal, Royal Economic Society, vol. 92(366), pages 268-84, June.
  11. Mervyn A. King & Jonathan I. Leape, 1987. "Asset Accumulation, Information, and the Life Cycle," NBER Working Papers 2392, National Bureau of Economic Research, Inc.
  12. Feldstein, Martin S, 1976. "Personal Taxation and Portfolio Composition: An Econometric Analysis," Econometrica, Econometric Society, vol. 44(4), pages 631-50, July.
  13. Hubbard, Robert Glenn, 1985. "Personal Taxation, Pension Wealth, and Portfolio Composition," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 53-60, February.
  14. Eric M. Engen & William G. Gale & John Karl Scholz, 1994. "Do Saving Incentives Work?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 85-180.
  15. Nelson, Forrest D., 1977. "Censored regression models with unobserved, stochastic censoring thresholds," Journal of Econometrics, Elsevier, vol. 6(3), pages 309-327, November.
  16. Mervyn A. King & Jonathan I. Leape, 1984. "Wealth and Portfolio Composition: Theory and Evidence," NBER Working Papers 1468, National Bureau of Economic Research, Inc.
  17. Goldsmith, David, 1976. "Transactions Costs and the Theory of Portfolio Selection," Journal of Finance, American Finance Association, vol. 31(4), pages 1127-39, September.
  18. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, vol. 65(3), pages 367-83, June.
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Cited by:
  1. James Banks & Sarah Smith, 1996. "Savings and wealth in the UK: evidence from micro-data," Fiscal Studies, Institute for Fiscal Studies, vol. 17(2), pages 37-64, January.

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