Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103734
Authors: 
Becker, Gideon
Year of Publication: 
2014
Series/Report no.: 
University of Tübingen Working Papers in Economics and Finance 74
Abstract: 
What determines the risk structure of financial portfolios of German households? In this paper we estimate the determinants of the share of financial wealth invested in three broad risk classes. We employ a new econometric approach - the so called fractional multinomial logit model - which allows for joint estimation of shares while accounting for their fractional nature. We extend the model to allow for unobserved heterogeneity across households via maximum simulated likelihood. We find that self-assessed appetite for risk as well as the level of wealth have strong positive effects on the riskiness of the average household's portfolio. These findings largely stay true even after we control for the potential confounding effects of unobserved differences across households via correlated random effects.
Subjects: 
household finance
portfolio composition
non-linear panel data model
fractional response model
unobserved heterogeneity
JEL: 
C15
C33
C35
C51
C58
D14
G11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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