This paper describes participation of Cyprus households in financial and real assets using new data from the 1999 Cyprus Survey of Consumer Finances, and compares Cyprus to the United States and four major European countries. Almost 9 out of 10 Cyprus households own some financial asset. After checking accounts, the most popular financial asset is government savings bonds. One in two households participated in stocks directly or indirectly in 1999, a year of stock market frenzy, reaching participation levels comparable only to the United States. Despite the absence of mutual funds, almost one third of households invest in managed portfolios linked to life insurance, and this exceeds direct stockholding even in 1999. Participation in direct stockholding is higher than in other countries, overall and for households below 50 years, and unusually high for the very young. Potential sources of concern include the limited number of stocks held by direct stockholders, and the presence of a significant contingent with limited background. Diversification across risk categories of financial assets is limited, but the majority of those holding few assets do not hold stocks directly. Those who do hold stocks directly are poorly diversified across different stocks. More than one in two households have some form of life insurance, but participation in individual retirement accounts is very low. Participation in risky assets, financial or real, far exceeds that in other countries. Yet, a strong contingent of households concentrates on risky real assets and abstains from risky financial assets, even during 1999. Rates of ownership of real assets are exceptionally high compared to the other countries. Homeownership rates far exceed those in the United States, and the majority of homeowners own their home fully. One quarter of Cyprus households own business equity, more than double the rate in the United States.
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Luigi Guiso & Tullio Jappelli, 2000.
"Household Portfolios in Italy,"
CSEF Working Papers
43, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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