IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Individual risk attitudes and the composition of financial portfolios: Evidence from German household portfolios

  • Barasinska, Nataliya
  • Schäfer, Dorothea
  • Stephan, Andreas

This paper explores the relationship between the self-declared risk aversion of private investors and their propensity to hold incomplete portfolios of financial assets. The analysis is based on household survey data from the German Socioeconomic Panel (SOEP) that provides a reliable measure of individual attitudes toward financial risk. Our findings suggest that more risk averse households tend to hold incomplete portfolios consisting mainly of a few risk-free assets. We also find that the propensity to acquire additional assets is highly dependent on whether liquidity and safety needs are met.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S1062976911000615
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 52 (2012)
Issue (Month): 1 ()
Pages: 1-14

as
in new window

Handle: RePEc:eee:quaeco:v:52:y:2012:i:1:p:1-14
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620167

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Kapteyn, A. & Teppa, F., 2002. "Subjective Measures of Risk Aversion and Portfolio Choice," Discussion Paper 2002-11, Tilburg University, Center for Economic Research.
  2. Richard H. Thaler & Shlomo Benartzi, 2001. "Naive Diversification Strategies in Defined Contribution Saving Plans," American Economic Review, American Economic Association, vol. 91(1), pages 79-98, March.
  3. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
  4. Dohmen, Thomas J & Falk, Armin & Huffman, David & Schupp, Jürgen & Sunde, Uwe & Wagner, Gert Georg, 2006. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," CEPR Discussion Papers 5517, C.E.P.R. Discussion Papers.
  5. William N. Goetzmann & Alok Kumar, 2008. "Equity Portfolio Diversification," Review of Finance, European Finance Association, vol. 12(3), pages 433-463.
  6. Wilson, Bonnie, 2003. "Diversification of risk and saving," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(4), pages 697-712.
  7. Hochguertel, Stefan & Alessie, Rob & van Soest, Arthur, 1997. " Saving Accounts versus Stocks and Bonds in Household Portfolio Allocation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 81-97, March.
  8. John Y. Campbell, 2006. "Household Finance," Journal of Finance, American Finance Association, vol. 61(4), pages 1553-1604, 08.
  9. Skinner, Jonathan, 1988. "Risky income, life cycle consumption, and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 237-255, September.
  10. 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.
  11. Yunker, James A. & Melkumian, Alla A., 2010. "The effect of capital wealth on optimal diversification: Evidence from the Survey of Consumer Finances," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(1), pages 90-98, February.
  12. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
  13. Börsch-Supan, Axel & Eymann, Angelika, 2000. "Household portfolios in Germany," Papers 00-15, Sonderforschungsbreich 504.
  14. Francisco Gomes & Alexander Michaelides, 2003. "Optimal life-cycle asset allocation: understanding the empirical evidence," LSE Research Online Documents on Economics 24900, London School of Economics and Political Science, LSE Library.
  15. William Goetzmann & Lingfeng Li & K. Rouwenhorst, 2001. "Long-Term Global Market Correlations," Yale School of Management Working Papers ysm237, Yale School of Management, revised 01 Jan 2008.
  16. Börsch-Supan, Axel & Eymann, Angelika, 2000. "Household Portfolios in Germany," Discussion Papers 603, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
  17. Mervyn A. King & Jonathan I. Leape, 1987. "Asset Accumulation, Information, and the Life Cycle," NBER Working Papers 2392, National Bureau of Economic Research, Inc.
  18. Kelly, Morgan, 1995. "All their eggs in one basket: Portfolio diversification of US households," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 87-96, June.
  19. Stephen P. Zeldes, 1989. "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 275-298.
  20. John Y. Campbell & Yeung Lewis Chan & Luis M. Viceira, 2001. "A Multivariate Model of Strategic Asset Allocation," NBER Working Papers 8566, National Bureau of Economic Research, Inc.
  21. Gerlinde Fellner & Boris Maciejovsky, . "Risk Attitude and Market Behavior: Evidence from Experimental Asset Markets," Papers on Strategic Interaction 2002-34, Max Planck Institute of Economics, Strategic Interaction Group.
  22. Valery Polkovnichenko, 2005. "Household Portfolio Diversification: A Case for Rank-Dependent Preferences," Review of Financial Studies, Society for Financial Studies, vol. 18(4), pages 1467-1502.
  23. Christopher D. Carroll, 1998. "Why Do the Rich Save So Much?," NBER Working Papers 6549, National Bureau of Economic Research, Inc.
  24. Blume, Marshall E & Friend, Irwin, 1975. "The Asset Structure of Individual Portfolios and Some Implications for Utility Functions," Journal of Finance, American Finance Association, vol. 30(2), pages 585-603, May.
  25. Victor DeMiguel & Lorenzo Garlappi & Raman Uppal, 2009. "Optimal Versus Naive Diversification: How Inefficient is the 1-N Portfolio Strategy?," Review of Financial Studies, Society for Financial Studies, vol. 22(5), pages 1915-1953, May.
  26. Boris Maciejovsky & Tarek El-Sehitya & Hans Haumerb & Christian Helmensteinc & Erich Kirchlerd, . "Hindsight Bias and Individual Risk Attitude within the Context of Experimental Asset Markets," Papers on Strategic Interaction 2002-16, Max Planck Institute of Economics, Strategic Interaction Group.
  27. Alessie, R.J.M. & Hochgürtel, S. & van Soest, A.H.O., 2000. "Household Portfolios in the Netherlands," Discussion Paper 2000-55, Tilburg University, Center for Economic Research.
  28. Caballero, Ricardo J, 1991. "Earnings Uncertainty and Aggregate Wealth Accumulation," American Economic Review, American Economic Association, vol. 81(4), pages 859-71, September.
  29. King, Mervyn A. & Leape, Jonathan I., 1998. "Wealth and portfolio composition: Theory and evidence," Journal of Public Economics, Elsevier, vol. 69(2), pages 155-193, June.
  30. Carol C. Bertaut & Martha Starr-McCluer, 2000. "Household portfolios in the United States," Finance and Economics Discussion Series 2000-26, Board of Governors of the Federal Reserve System (U.S.).
  31. Luigi Ventura & Joseph G. Eisenhauer, 2005. "The Relevance of Precautionary Saving," German Economic Review, Verein für Socialpolitik, vol. 6(1), pages 23-35, 02.
  32. R. S. Uhler & J. G. Cragg, 1971. "The Structure of the Asset Portfolios of Households," Review of Economic Studies, Oxford University Press, vol. 38(3), pages 341-357.
  33. Börsch-Supan, Axel & Eymann, Angelika, 0000. "Household Portfolios in Germany," Sonderforschungsbereich 504 Publications 00-15, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  34. Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 537-579.
  35. Merton, Robert C., 1987. "A simple model of capital market equilibrium with incomplete information," Working papers 1869-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  36. Tin, Jan, 1998. "Household demand for financial assets: A life-cycle analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(4), pages 875-897.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:quaeco:v:52:y:2012:i:1:p:1-14. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.