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Latest Research
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| , Universitą di Sassari, Ente Einaudi & CEPR |
| , Universitą di Salerno, CSEF & CEPR |
The paper uses the UniCredit Survey to understand the determinants of portfolio allocation (the choice of investing in the stock market, either directly or through mutual funds and investment accounts) and diversification (how to diversify equity investment). The aim is to single out the separate contributions of transaction costs, risk aversion, financial information and sophistication, and trust in financial intermediaries. The sample contains unique information on household wealth, demographic variables, and proxies for risk aversion, trust in financial advisor, and financial literacy. The results suggest that risk aversion, transaction costs, information costs and financial advice are key variables explaining portfolio allocations between stocks and other assets, and equity diversification. They also highlight that heterogeneity in risk aversion is of paramount importance to explain portfolio choice, and that this heterogeneity does not stem exclusively from a correlation between wealth and risk aversion.
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