We analyze whether the efficiency of households’ asset mixes is driven by households’ wealth as suggested by previous studies. This question is of particular importance when assessing if employing a buy-and-hold strategy with their current asset mix is an appropriate advice for all households. Using the dataset of the Panel on Household Finances by the German central bank and a new approach that extracts household-specific portfolios to measure households’ wealth available for investments, we find that more wealthy households do not have a more efficient asset mix. Instead, the gender of the financial knowledgeable person (FKP) and the household’s risk attitude significantly influence the efficiency of the household’s asset mix. Our results are robust to household members’ estimation regarding future savings and the FKP’s formal level of education and financial literacy. A buy-and-hold strategy in low-fee index products could, therefore, considerably enhance both more and less wealthy households’ investment success.
Does Households’ Wealth Predict the Efficiency of their Asset Mix? Empirical Evidence Available to Purchase
This paper uses data from the Deutsche Bundesbank Panel on Household Finances. The results published and the related observations and analysis may not correspond to results or analysis of the data producers. We would like to thank Barkley Rosser, the editor of the Review of Behavioral Economics. Furthermore, we would like to thank Deutsche Bundesbank, especially Martin Eisele, for providing the dataset of the PHF survey. In addition, we would like to thank Stefan Wendt from Reykjavik University in Reykjavik, Iceland, William Paul Spurlin, from Mississippi State University, participants of the 2018 Annual Meeting of the Financial Management Association (FMA) International in San Diego, California, participants of the 2018 SABE/IAREP Conference in London, England, participants of the 2017 Eastern Finance Association meeting in Jacksonville, Florida, participants of the 2nd Research in Behavioral Finance Conference 2016 in Amsterdam, Netherlands, and seminar participants at Bamberg University in Bamberg, Germany for helpful comments and suggestions.
Oehler A, Horn M (2019), "Does Households’ Wealth Predict the Efficiency of their Asset Mix? Empirical Evidence". Review of Behavioral Economics, Vol. 6 No. 3 pp. 249–282, doi: https://doi.org/10.1561/105.00000106
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