Household Ownership of Stocks, Business Assets, and Investment Real Estate: An Endogenous Probit Model
Proceedings of the Academy of Financial Services, 2008
17 Pages Posted: 10 Dec 2016
Date Written: 2008
In the 1995-2004 period, 48% of U.S. households owned stock assets, 11% owned private business assets, and 18% owned investment real estate other than a primary residence. These risky, high return investment assets accounted for 45% of household assets in the aggregate, even though 44% of households owned no high return risky investment assets. This paper investigates determinants of ownership of each type of risky investment asset, using logistic regressions and an endogenous probit model to test for endogenous relationships between each ownership choice. In the logistic regressions, ownership of business assets had a negative effect on stock ownership and a positive effect on investment real estate ownership, and ownership of investment real estate had a positive effect on both stock ownership and on business asset ownership. We found significant endogenous relationships between stock ownership and investment real estate ownership, between investment real estate ownership and business asset ownership, and between stock ownership and business asset ownership. White households had significantly higher predicted stock ownership than those in other racial/ethnic groups, but there were no significant differences between groups in predicted ownership of investment real estate. White households and those in the “other” group (mostly Asian) did not differ in predicted ownership of business assets, but Black and Hispanic households had lower predicted ownership of business assets than White households.
Keywords: Investment Choices, Portfolio Allocation, Racial/Ethnic Differences, Investment Real Estate, Business Ownership, Survey of Consumer Finances
JEL Classification: D14, D92, J15
Suggested Citation: Suggested Citation