Investment choice and asset allocation of Italian households: the discrete-continuous approach

Abstract

Financial and monetary policies are considered to be effective depending on the reaction of financial markets which are increasingly populated by households. In this article, from intertemporal settings, I derive a Financial Almost Ideal (FAI) Demand System and I estimate it by highlighting the determinants of both limited participation to financial markets and asset substitutability/complementarity in the allocating stage. Finally, the wealth elasticities provide some further insights on the low diffusion of the newer and more complex financial instruments across Italian households.