Project in detail

Household Portfolio Choice

Members of this project:



A lot is common knowledge about German households’ portfolio choice, especially by international comparison: similar to other countries, stocks play an important role in the portfolios of the rich. On the other hand the overall share of stock market wealth in household portfolios is still small even after the boom years of the late 1990s. The majority still does not hold stocks at all. Other investments, like life insurance contracts, play an exceptionally important role in Germany although the public pension system has traditionally been a rather generous one. Yet not only by international comparison but also compared to the implications of theoretical models of life-cycle portfolio choice there are several distinctive features of Germans’ asset allocation to be explained. This project therefore aims to analyze stylized facts of life-cycle portfolio choice in Germany using micro data. Hereby cohort effects may play an important role: younger cohorts experienced higher wealth and earnings paths than their older counterparts. Another possible source of cohort differences in portfolio choice are individuals’ risk preferences. Early results imply that for some asset categories cohort effects may play an important role. Further, we observe little portfolio reallocation towards safer assets as households approach retirement. At the contrary – portfolios seem to tilt slightly towards riskier assets. The next steps involve analyzing the extent to which demographic changes were the driving force behind the observed changes in household portfolios. Another task will be to assess the influence of household composition on asset allocation.

MEA Discussion Papers arisen from this project:

Publications arisen from this project:
  • Mathias Sommer (2005): Trends in German households’ portfolio behavior - assessing the importance of age- and cohort-effects, MEA Discussion Paper 082-05
  • Börsch-Supan, Axel; Essig, Lothar (2003): Stockholding in Germany, Guiso, Luigi; Haliassos, Michael; Jappelli, Tullio, Stockholding in Europe, Palgrave MacMillan, New York, 110-140
  • Börsch-Supan, Axel; Eymann, Angelika (2002): Household Portfolios in Germany, Guiso, L.; Haliassos, M.; Jappelli, T., Household Portfolios, MIT Press, Cambridge, Massachusetts, 291-340

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