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Department of Economics, Uppsala University Working Paper Series, Department of Economics, Uppsala University

No 2001:4:
Portfolio Allocation over the Life Cycle: Evidence from Swedish Household Data

Björn Andersson ()

Abstract: This paper provides empirical evidence on life-cycle patterns in the asset allocation of Swedish households. Data on household portfolio allocation are collected from the HINK surveys for the period 1982-1992, and portfolio shares of different asset categories are regressed on age, period, and cohort dummies as well as socio-economic and demographic variables. There are evident differences in the age profiles for the demand of different assets. The fraction of "risky" financial assets follows a hump-shaped age profile, as does the share of total real assets. While the probability of ownership of "safe" financial assets increases over life, the weight in the portfolio has a U-shaped age pattern. This is also true for the fraction of total financial assets. Furthermore, there are differences in the asset allocation of different birth cohorts; the portfolio weight of real assets is relatively higher for the "baby-boom" generation, while younger generations are more prone to invest in "risky" financial assets.

Keywords: Life cycle; asset demand; portfolio choice; cohort; differential mortality; Sweden; (follow links to similar papers)

JEL-Codes: C20; D91; E21; G11; J10; (follow links to similar papers)

33 pages, February 1, 2001

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