We develop a structural econometric model to elicit household-specic expectations about future nancial asset returns and risk attitudes by using data on observed portfolio holdings and self-assessed willingness to bear nancial risk. Our framework assumes that household portfolios are subject to short-selling constraints in stocks and bonds, and that nancial investment decisions are taken conditional on real estate and business wealth. We derive an explicit solution for the model, and estimate its parameters using the US Survey of Consumer Finances from 1995 to 2013. The results show that our modied mean-variance model ts the data adequately, and that the demographic, occupational and educational characteristics of the investors are relevant in shaping risk aversion and return expectations. In contrast, wealth, income, and past market performance have limited impacts on expectations and risk aversion.

Return Expectations and Risk Aversion Heterogeneity in Household Portfolios

BUCCIOL, Alessandro;
2017

Abstract

We develop a structural econometric model to elicit household-specic expectations about future nancial asset returns and risk attitudes by using data on observed portfolio holdings and self-assessed willingness to bear nancial risk. Our framework assumes that household portfolios are subject to short-selling constraints in stocks and bonds, and that nancial investment decisions are taken conditional on real estate and business wealth. We derive an explicit solution for the model, and estimate its parameters using the US Survey of Consumer Finances from 1995 to 2013. The results show that our modied mean-variance model ts the data adequately, and that the demographic, occupational and educational characteristics of the investors are relevant in shaping risk aversion and return expectations. In contrast, wealth, income, and past market performance have limited impacts on expectations and risk aversion.
Truncated and censored models
Household finance
Risk aversion
Expectations
Mean variance analysis
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11562/947126
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