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A dynamic singular equation system of asset demand

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  • Zietz, Joachim
  • Weichert, Ronald

Abstract

The paper presents estimates of a dynamic demand system of the AIDS type for financial assets. The results suggest that dynamic behavior plays a major role in determining asset demand. Estimates on the basis of the equivalent static equilibrium models prove to be clearly inferior statistically. Also, the theoretical restrictions of homogeneity and symmetry are thoroughly rejected by the static model versions, however, not by the dynamic demand system. The cross rate elasticities between bonds and savings deposits and also between money and time deposits are found to be negligible for Germany. Time deposits turn out to be very sensitive to own and cross rates of return.
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Suggested Citation

  • Zietz, Joachim & Weichert, Ronald, 1988. "A dynamic singular equation system of asset demand," European Economic Review, Elsevier, vol. 32(6), pages 1349-1357, July.
    • Handle: RePEc:eee:eecrev:v:32:y:1988:i:6:p:1349-1357
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    Cited by:

    1. Richard Ochmann, 2013. "Asset demand in the financial AIDS portfolio model -- evidence from a major tax reform," Applied Financial Economics, Taylor & Francis Journals, vol. 23(8), pages 649-670, April.
    2. Syriopoulos, Theodore, 2002. "Risk aversion and portfolio allocation to mutual fund classes," International Review of Economics & Finance, Elsevier, vol. 11(4), pages 427-447.
    3. Richard Ochmann, 2014. "Differential income taxation and household asset allocation," Applied Economics, Taylor & Francis Journals, vol. 46(8), pages 880-894, March.
    4. D. Peter Broer & W. Jos Jansen, 1998. "Dynamic Portfolio Adjustment and Capital Controls: A Euler Equation Approach," Southern Economic Journal, John Wiley & Sons, vol. 64(4), pages 902-921, April.
    5. Joachim Zietz, 1994. "An Expanded Graphical Representation of the Portfolio Balance Model of Exchange Rate Determination," The American Economist, Sage Publications, vol. 38(2), pages 52-57, October.
    6. Weichert, Ronald & Zietz, Joachim, 1986. "Das Verhalten der privaten Haushalte am Kapitalmarkt: Eine empirirische Analyse," Kiel Working Papers 262, Kiel Institute for the World Economy.

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