Habit Formation and Persistence in Individual Asset Portfolio Holdings: The Case of Italy
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Summary:
This paper uses six waves of the Bank of Italy Survey of Households Income and Wealth to explore the dynamics of asset portfolio ownership. The household asset portfolio decision is a choice among discrete alternatives, and I model the problem in a multinomial framework. I focus on a particularly important feature of household portfolio behavior: the infrequency of portfolio allocation changes. I find evidence of strong unobserved heterogeneity through time-varying error components, which I interpret as taste persistence in both the risky and safe asset participation decisions. I estimate the model using the method of maximum smoothly simulated likelihood.
Series:
Working Paper No. 2006/029
Subject:
Asset allocation Asset and liability management Bonds Econometric analysis Financial institutions Financial markets Logit models Stock markets Stocks
English
Publication Date:
January 1, 2006
ISBN/ISSN:
9781451862898/1018-5941
Stock No:
WPIEA2006029
Pages:
44
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