Wealth Shocks, Credit-Supply Shocks, and Asset Allocation: Evidence from Household and Firm Portfolios

48 Pages Posted: 5 Apr 2014  

Thomas K. Kick

Deutsche Bundesbank

Enrico Onali

Aston University - Aston Business School; University of Wales System - Bangor University, Bangor Business School

Benedikt Ruprecht

Deutsche Bundesbank

Klaus Schaeck

University of Bristol

Multiple version iconThere are 2 versions of this paper

Date Written: March 13, 2014

Abstract

We use a unique dataset with bank clients’ security holdings for all German banks to examine how macroeconomic shocks affect asset allocation preferences of households and non-financial firms. Our analysis focuses on two alternative mechanisms which can influence portfolio choice: wealth shocks, which are represented by the sovereign debt crisis in the Euro area, and credit-supply shocks which arise from reductions in borrowing abilities during bank distress. While households with large holdings of securities from stressed Euro area countries (Greece, Ireland, Italy, Portugal, and Spain) decrease the degree of concentration in their security portfolio as a result of the Euro area crisis, non-financial firms with similar levels of holdings from stressed Euro area countries do not. Credit-supply shocks at the bank level result in lower concentration, for both households and non-financial corporations. Only shocks to corporate credit bear ramifications on bank clients’ portfolio concentration. Our results are robust to falsification tests, and instrumental variables estimation.

Keywords: asset allocation; sovereign debt crisis; credit-supply shocks; bank distress

JEL Classification: D12; D13; G11; G21

Suggested Citation

Kick, Thomas K. and Onali, Enrico and Ruprecht, Benedikt and Schaeck, Klaus, Wealth Shocks, Credit-Supply Shocks, and Asset Allocation: Evidence from Household and Firm Portfolios (March 13, 2014). ECB Working Paper No. 1662. Available at SSRN: https://ssrn.com/abstract=2408449

Thomas K. Kick (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
D-60431 Frankfurt/Main
Germany

Enrico Onali

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

University of Wales System - Bangor University, Bangor Business School ( email )

Bangor, Gwynedd, Wales LL57 2DG
United Kingdom

Benedikt Ruprecht

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
D-60431 Frankfurt/Main
Germany
+49 69 9566 - 8618 (Phone)

Klaus Schaeck

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

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