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Ownership of Stocks and Mutual Funds: A Panel Data Analysis

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

    (Tilburg University, Center for Economic Research)

Abstract

In many industrial countries, ownership rates of risky assets have risen substantially over the past decade.This trend has potentially wide-ranging implications for the intertemporal and cross-sectional allocation of risk, and for the macro economy, establishing the need for understanding ownership dynamics at the micro level.This paper offers one of the first such analyses using representative panel survey data.We focus on the two main types of risky financial assets, mutual funds and individual stocks.We extend existing univariate dynamic binary choice models to the multivariate case and take account of interactions between the two types of assets.The models are estimated on data from the 1993-1998 waves of the Dutch CentER Savings Survey.We find that both unobserved heterogeneity and state dependence play a large role for both types of assets.Most of the positive relation between ownership of mutual funds in one period and ownership of individual stocks in the next period or vice versa, is explained by unobserved heterogeneity: if we account for correlation between the household specific effects in the two binary choice equations, we find a negative effect of lagged ownership of stocks on the ownership of mutual funds.These findings can be explained by adjustment costs that make it optimal to stick to one type of asset.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2001-94.

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Date of creation: 2001
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Handle: RePEc:dgr:kubcen:200194

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  14. Kennickell, Arthur B & Starr-McCluer, Martha, 1997. "Retrospective Reporting of Household Wealth: Evidence from the 1983-1989 Survey of Consumer Finances," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(4), pages 452-63, October.
  15. Richard Blundell & Steve Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers W00/12, Institute for Fiscal Studies.
  16. Samuelson, Paul A, 1969. "Lifetime Portfolio Selection by Dynamic Stochastic Programming," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 239-46, August.
  17. John Heaton & Deborah Lucas, 2000. "Portfolio Choice and Asset Prices: The Importance of Entrepreneurial Risk," Journal of Finance, American Finance Association, vol. 55(3), pages 1163-1198, 06.
  18. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
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