Household Portfolios and Financial Literacy: The Flight To Delegation

30 Pages Posted: 21 Feb 2024

See all articles by Sarah Brown

Sarah Brown

University of Sheffield - Department of Economics; IZA Institute of Labor Economics

Alexandros Kontonikas

University of Essex

Alberto Montagnoli

University of Sheffield

Harry Pickard

University of Newcastle

Karl Taylor

University of Sheffield - Department of Economics

Abstract

In this paper we analyse the asset allocation of European households, focusing on developments during the period that followed the recent twin financial crises. We examine whether ``search for yield'' materialises outside financial institutions and whether the degree of financial literacy plays a role. We consider a wider set of alternatives to safe assets by incorporating mutual funds to the standard set of stocks and bonds. We provide novel evidence which suggests that the “search for yield” during the post-crisis period of low interest rates took place not by raising the direct holdings of stocks and bonds, but rather indirectly through higher mutual funds’ holdings, in line with a “flight to delegation”. Importantly, this behaviour is strongly linked to the level of financial literacy, with the most literate households displaying significantly higher use of mutual funds.

Keywords: Asset allocation, Financial literacy, Delegation

Suggested Citation

Brown, Sarah and Kontonikas, Alexandros and Montagnoli, Alberto and Pickard, Harry and Taylor, Karl, Household Portfolios and Financial Literacy: The Flight To Delegation. Available at SSRN: https://ssrn.com/abstract=4733672 or http://dx.doi.org/10.2139/ssrn.4733672

Sarah Brown

University of Sheffield - Department of Economics

9 Mappin Street
Sheffield, S1 4DT
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Alexandros Kontonikas

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Alberto Montagnoli (Contact Author)

University of Sheffield

17 Mappin Street
Sheffield, S1 4DT
United Kingdom

Harry Pickard

University of Newcastle ( email )

Karl Taylor

University of Sheffield - Department of Economics

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

Paper statistics

Downloads
61
Abstract Views
369
Rank
753,166
PlumX Metrics