Abstract
In this paper, we present a newly generated data set on real returns of households’ aggregated asset holdings, which adds additional and more sophisticated information to existing relevant datasets in the literature. To do this, we draw on various datasets from public and private sources and then transform and combine them in a consistent manner that allows for international comparative and intertemporal analyses. Based on this, we address two current debates on the development of household wealth in the euro area that have been triggered by the low-interest environment. The first debate refers to the development of real yields on household wealth from 2000 to 2018, whereas the second debate deals with the mean-variance efficiency of household portfolios. Contrary to widespread belief, we find that yields on total wealth, which were largely dominated by non-financial assets’ yields, were mostly positive, although they exhibit a declining trend. Moreover, on average, overall real yields were significantly lower after 2008. Referring to portfolio efficiency, we find that current portfolios seem to be comparatively close to mean-variance efficiency. If households were to optimize their portfolios despite limited room for improvement, holdings of equity and investment fund shares should be reduced, contradicting common recommendations of financial advisors.
Highlights
Risk and Financial Management 14: 99.Since the outbreak of the financial crisis in 2008, with one brief exception in 2011, there has been only one direction for key interest rates in the eurozone: downwards
Our key results are as follows: As to research question one, the results show that real returns on total household wealth were mostly positive in all jurisdictions but followed a declining trend and were driven mainly by real returns on non-financial assets
Addressing research question three, we find that the potentials for increasing real returns and/or decreasing risk by portfolio restructuring are very limited, as household portfolios seem to be close to their mean-variance optima
Summary
For this purpose, it develops and analyses a dataset on the real rates of return on the total non-financial and financial wealth of households in the four large euro area countries (Germany, France, Italy, Spain) and in the euro area as a whole for the period 2000 to 2018. To the best of our knowledge, other approaches for the compilation of real yields on households’ financial assets in the euro area currently do not exist (Andreasch et al (2020) combined macroeconomic information on the real returns to households’ financial assets in Germany and Austria with microeconomic information on the portfolio composition of households with different wealth levels.
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