Household Investment Asset Variation and Wealth

The International Journal of Business and Finance Research, Vol. 4, No. 2, pp. 1-11, 2010

11 Pages Posted: 9 Sep 2010

See all articles by Nathaniel J. Harness

Nathaniel J. Harness

Texas A&M University - Department of Economics and Finance

Michael S. Finke

The American College

Swarn Chatterjee

University of Georgia

Multiple version iconThere are 2 versions of this paper

Date Written: 2010

Abstract

Frequent shifting of household portfolio composition may erode wealth due to poor market timing and transaction costs. If household preferences are stable, the optimal wealth maximizing strategy is periodically rebalancing to maintain a relatively constant ratio or investment assets to wealth from year to year. However, some households may fail to rebalance, or may change their preference for broad asset classes because of inexperience or behavioral biases. This research tests the impact of variation in the capital accumulation ratio (CAR), a commonly used ratio of investment assets to net worth, on changes in wealth using quantile regression. Using quantile regression, we find that having a high standard deviation of CAR results in the greatest losses among those with the lowest change in wealth between 1994 and 2004.

Keywords: Investment variation, portfolio choice, capital accumulation

JEL Classification: D14, G11, H31

Suggested Citation

J. Harness, Nathaniel and Finke, Michael S. and Chatterjee, Swarn, Household Investment Asset Variation and Wealth (2010). The International Journal of Business and Finance Research, Vol. 4, No. 2, pp. 1-11, 2010, Available at SSRN: https://ssrn.com/abstract=1666982

Nathaniel J. Harness (Contact Author)

Texas A&M University - Department of Economics and Finance ( email )

College of Business and Technology
College Station, TX 77843-4353
United States

Michael S. Finke

The American College ( email )

Bryn Mawr, PA 19010
United States

Swarn Chatterjee

University of Georgia ( email )

Athens, GA 30602-3622
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
72
Abstract Views
872
rank
436,051
PlumX Metrics