Who holds risky assets and how much?

Abstract

For the first time, the Household Finance and Consumption Survey (HFCS) dataset enables researchers to have a detailed insight into the relationship between wealth composition and the characteristics of households for the euro area countries. The HFCS is a complex survey accounting for survey design, non-response and coverage problems by providing specific weighting schemes and multiple implicates. This paper investigates the differences between risky asset holders and non-holders in a set of selected countries in the euro area by giving a comprehensive cross-country comparison of their wealth and socio-economic status. The findings show a substantial inequality between these two groups associated with their wealth, real estate ownership and debt level across the euro area countries. However, most of the differences can be reduced to a handful of relevant covariates. In particular, the focus of this paper is on the relationship between background risks and risky assets in the German-speaking countries in the HFCS dataset. So far, Austria and Germany lacked a qualitative dataset of such a scale and detail prior to the HFCS in order to answer questions concerning household risky assets. A logistic model and a GLM with the inverse Gaussian distribution are applied within the complex survey design to explore relevant covariates explaining the probability and the investment level of risky asset holdings. The logistic model for Austrian and German households suggests that housing risk is a negligible and insignificant factor when deciding to invest in risky assets, while credit constraint, occupation-linked income risks and entrepreneurial risks are major negative factors. However, none of these background risk factors are found to be significant when the level of investment is concerned.