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Households Expectations and Investing in Safe and Risky Financial Assets

Author

Listed:
  • Silvo Dajcman

    (University of Maribor, Faculty of Economics and Business, Slovenia)

Abstract

Drawing upon data from the European Commission’s consumer survey, this paper examines how four types of household expectations affect household financial portfolio decisions in the three largest euro area countries: Germany, France, and Italy. Focus is placed on the dynamic response of the shares of safe (currency and transferable deposits) and risky (equity and investment fund shares) financial assets in relation to the total value of financial assets held by the household sector to the shocks in expectations. The results illustrate that expectations are an important determinant of household financial portfolio decisions. In general, in response to improved expectations, households increase the share of risky assets and reduce the share of safe assets. However, country and expectations-type specific differences were observed. The effects of income, prices level, deposit rate and stock price shocks on the household financial portfolio are also documented and compared and the economic policy and financial industry implications of the results are discussed.

Suggested Citation

  • Silvo Dajcman, 2020. "Households Expectations and Investing in Safe and Risky Financial Assets," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 70(5), pages 431-460, November.
    • Handle: RePEc:fau:fauart:v:70:y:2020:i:5:p:431-460
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1472
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    More about this item

    Keywords

    household expectations; household financial portfolio; safe assets; risky assets;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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