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Wealth shocks and portfolio choice

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  • Christelis, Dimitris
  • Georgarakos, Dimitris
  • Jappelli, Tullio
  • Kenny, Geoff

Abstract

We use new euro area representative data from the Consumer Expectations Survey (CES) to elicit household-specific propensities to invest and consume out of positive wealth shocks. Using a randomized assignment of hypothetical lottery gains ranging from €5,000 to €50,000 and a realistic menu of consumption, saving and asset choices, we estimate the causal effect of wealth shocks on risky asset ownership and conditional asset shares. Wealth shocks have a positive effect on stockholding (between 8.4 and 12.8 percentage points increase in participation for the largest wealth shock). The majority of households do not participate in the stock market, even after a large increase in wealth. The conditional asset share invested in risky assets is constant for wealth shocks up to €20,000, and edges up slightly (by at most 2 %) for larger prizes. Our evidence is consistent with constant relative risk aversion for the majority of risky asset investors, while we also find important heterogeneity in the level of risk aversion across individuals.

Suggested Citation

  • Christelis, Dimitris & Georgarakos, Dimitris & Jappelli, Tullio & Kenny, Geoff, 2025. "Wealth shocks and portfolio choice," Journal of Monetary Economics, Elsevier, vol. 149(C).
    • Handle: RePEc:eee:moneco:v:149:y:2025:i:c:s0304393224000850
    DOI: 10.1016/j.jmoneco.2024.103632
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    Cited by:

    1. Georgarakos, Dimitris & Kenny, Geoff & Laeven, Luc & Meyer, Justus, 2025. "The digital euro: awareness, adoption and household portfolios," Research Bulletin, European Central Bank, vol. 138.
    2. Ignacio Belloc & José Alberto Molina, 2026. "Households with insufficient liquid assets: Consumption responses to income changes," Boston College Working Papers in Economics 1107, Boston College Department of Economics.
    3. Lea Best & Benjamin Born & Manuel Menkhoff, 2025. "The Impact of Interest: Firms' Investment Sensitivity to Interest Rates," CESifo Working Paper Series 12167, CESifo.
    4. Christelis, Dimitris & Georgarakos, Dimitris & Jappelli, Tullio & Kenny, Geoff & Meyer, Justus, 2026. "Stockholding in Europe: Evidence from the Consumer Expectations Survey," Working Paper Series 3239, European Central Bank.
    5. Yuriy Gorodnichenko & Dimitris Georgarakos & Geoff Kenny & Olivier Coibion, 2025. "The Impact of Geopolitical Risk on Consumer Expectations and Spending," NBER Working Papers 34195, National Bureau of Economic Research, Inc.
    6. Armantier, Olivier & Foncel, Jérôme & Treich, Nicolas, 2023. "Insurance and portfolio decisions: Two sides of the same coin?," Journal of Financial Economics, Elsevier, vol. 148(3), pages 201-219.

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    Keywords

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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