The Impact of Stock and Real Estate Returns on the Propensity of Households to Meet the Capital Accumulation Ratio Guideline

11 Pages Posted: 21 Jan 2014

See all articles by Jodi Letkiewicz

Jodi Letkiewicz

York University

Sherman D. Hanna

Ohio State University (OSU)

Date Written: 2013

Abstract

The current study investigates the impact of substantial economic fluctuations on household portfolios and analyzes how the fluctuations influence households’ propensities to meet the capital accumulation ratio threshold of 25%. The 1992 to 2007 Survey of Consumer Finances datasets were analyzed using means tests and a logistic regression. In periods when the stock market increased more than housing prices, the percentage of households meeting the 25% capital accumulation ratio threshold increased from the previous survey year but when housing prices increased more than the stock market, the percentage of households meeting the threshold decreased from the previous period. The patterns are consistent with households reacting passively to changes in housing and stock values rather than using the capital accumulation ratio guideline to adjust their balance sheets.

Keywords: capital accumulation ratio, financial ratios, investing, lifecycle theory of savings, Survey of Consumer Finances

JEL Classification: D11, D14, G11

Suggested Citation

Letkiewicz, Jodi and Hanna, Sherman D., The Impact of Stock and Real Estate Returns on the Propensity of Households to Meet the Capital Accumulation Ratio Guideline (2013). Journal of Financial Counseling and Planning, Vol. 24, No. 1, 2013. Available at SSRN: https://ssrn.com/abstract=2382382

Jodi Letkiewicz

York University ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Sherman D. Hanna (Contact Author)

Ohio State University (OSU) ( email )

1787 Neil Avenue
Campbell 265D
Columbus, OH 43210
United States
614-292-4584 (Phone)

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