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Household Portfolio Allocations: Evidence on Risk Preferences from the Household, Income, and Labour Dynamics in Australia (HILDA) Survey Using Tobit Models

Author

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  • Safdar Ullah Khan

    (Bond Business School, Bond University, Gold Coast, QLD 4229, Australia
    Economy, Planning and Environment, City of Gold Coast (CoGC), Gold Coast, QLD 9726, Australia)

  • Satyanarayana Ramella

    (Department of Business Administration, Southwestern Adventist University, Keene, TX 76059, USA)

  • Habib Ur Rahman

    (Faculty of Higher Education (Accounting and Finance), Holmes Institute, Gold Coast, QLD 4217, Australia)

  • Zulfiqar Hyder

    (Research Department, State Bank of Pakistan (Central Bank), Karachi 74000, Sindh, Pakistan)

Abstract

This study investigates intrahousehold risk preferences in household portfolio decision-making. Most household finance data are collected at the household level, and it is challenging to come up with an explanation of risk-taking decisions and have a direction on the within-household bargaining mechanisms. We provide these challenging pieces of evidence by applying a Tobit model on panel data taken from waves 2 to 6 of HILDA surveys. Overall, the results indicate that the risk-taking attitude of partners matters in household portfolio allocations. Risk-averse males and their female counterparts invest less in risky assets. Compared with the no-conflict (identical risk preferences) group, male partners with risk-loving behaviour tend to invest more in risky assets. Further, individual risk preferences are sensitive to fluctuations in equity and housing markets in Australia. Taken together, one of the crucial implications of our findings for future research is that household-bargaining models should, perhaps, give more bargaining power to risk-loving males, offering an additional explanation for the determinants of risk-taking behaviour of households. Understanding the risk-taking attitudes of households is important for future work to understand the fraction of households that end up with a negative net worth in recessions or crisis conditions, such as financial crises, pandemics, and wars.

Suggested Citation

  • Safdar Ullah Khan & Satyanarayana Ramella & Habib Ur Rahman & Zulfiqar Hyder, 2022. "Household Portfolio Allocations: Evidence on Risk Preferences from the Household, Income, and Labour Dynamics in Australia (HILDA) Survey Using Tobit Models," JRFM, MDPI, vol. 15(4), pages 1-13, April.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:4:p:161-:d:785027
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    2. Liu, Kui & Meng, Chuyan & Yang, Shasha & Zhang, Guanglu, 2024. "Air pollution and individual risk preference: Evidence from China," Energy Economics, Elsevier, vol. 136(C).
    3. Ronald Ravinesh Kumar & Peter Josef Stauvermann, 2022. "Portfolios under Different Methods and Scenarios: A Case of Fiji’s South Pacific Stock Exchange," JRFM, MDPI, vol. 15(12), pages 1-27, November.

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