Why Have U.S. Households Increasingly Relied on Mutual Funds to Own Equity?

22 Pages Posted: 22 Oct 2005

See all articles by John V. Duca

John V. Duca

Federal Reserve Banks - Federal Reserve Bank of Dallas; Oberlin College

Abstract

U.S. households have increasingly used mutual funds to own equity outside of retirement accounts owing to two developments. The first is a decline in equity mutual fund loads, which are negatively correlated with stock ownership rates, which have doubled owing to greater ownership through mutual funds. The second is improved confidence in future family finances. Both effects are consistent with recent models of equity participation, in which lower asset transfer costs and lower income risk induce equity investing by middle-income households, who - in practice and owing to diversification considerations - are more likely to indirectly hold stocks through mutual funds.

Suggested Citation

Duca, John V., Why Have U.S. Households Increasingly Relied on Mutual Funds to Own Equity?. Review of Income and Wealth, Vol. 51, No. 3, pp. 375-396, September 2005, Available at SSRN: https://ssrn.com/abstract=800864

John V. Duca (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

Oberlin College

Oberlin, OH 44074
United States

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