In this paper, we analyze the relationship between age and portfolio structure for households in the US. We focus on both the probability that households of different ages own particular portfolio assets and the fraction of their net worth allocated to each asset category. We distinguish between age and cohort effects using data from the repeated cross-sections of the Federal Reserve Board's Surveys of Consumer Finances. We present two broad conclusions. First, there are important differences across asset classes in both the age-specific probabilities of asset ownership and in the portfolio shares of different assets at different ages. The notnion that all assets can be treated as identical from the standpoint of analyzing household wealth accumulation is not supported by the data. Institutional factors, asset liquidity, and evolving investor tastes must be recognized in modeling asset demand. These factors could affect analyses of overall household saving as well as the composition of this saving. Second, there are evident differences in the asset ownership probabilities of different birth cohorts. Currently, older households were more likely to hold corporate stock, and less likely to hold tax-exempt bonds, than younger households at any given age. These differences across cohorts are important to recognize when analyzing asset accumulation profiles.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
6185.
Length: Date of creation: Sep 1997 Date of revision: Publication status: published as Mike Hard volume, forthcoming. Handle: RePEc:nbr:nberwo:6185
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Find related papers by JEL classification: E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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Canner, Niko & Mankiw, N Gregory & Weil, David N, 1997.
"An Asset Allocation Puzzle,"
American Economic Review,
American Economic Association, vol. 87(1), pages 181-91, March.
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Niko Canner & N. Gregory Mankiw & David N. Weil, 1994.
"An Asset Allocation Puzzle,"
NBER Working Papers
4857, National Bureau of Economic Research, Inc.
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Kimball, Miles S, 1993.
"Standard Risk Aversion,"
Econometrica,
Econometric Society, vol. 61(3), pages 589-611, May.
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