Wealth and Portfolio Composition: Theory and Evidence

Mervyn A. King, Jonathan I. Leape

NBER Working Paper No. 1468
Issued in September 1984
NBER Program(s):Public Economics

In this paper, we examine a new survey of 6,010 U.S.households and estimate a model for the allocation of total net worth among different assets. The paper has three main aims. The first is to investigate the extent to which a conventional portfolio choice model can explain the differences in portfolio composition among households. Our survey data show that most households hold only a subset of the available assets. Hence we analyze a model in which investors choose to hold incomplete portfolios. We show that the empirical specification of the joint discrete and continuous choice that characterizes household portfolio behavior is a switching regressions model with endogenous switching. The second aim is to examine the impact of taxes on portfolio composition. The survey contains a great deal of information on taxable incomes and deductions which enable us to calculate rather precisely the marginal tax rate facing each household.The third aim is to estimate wealth elasticities of demand for a range of assets and liabilities. We test the frequently made assumption of constant relative risk aversion.

download in pdf format
   (614 K)

download in djvu format
   (443 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w1468

Published: King, Mervyn and Jonathan I. Leape. "Wealth And Portfolio Composition: Theory And Evidence," Journal of Public Economics, 1998, v69(2,Aug), 155-193.

Users who downloaded this paper also downloaded* these:
Dicks-Mireaux and King w0903 Portfolio Composition and Pension Wealth: An Econometric Study
King and Leape w2392 Asset Accumulation, Information, and the Life Cycle
Poterba and Samwick w7392 Taxation and Household Portfolio Composition: U.S. Evidence from the 1980s and 1990s
Lewis w4951 Puzzles in International Financial Markets
King and Dicks-Mireaux w0614 Asset Holdings and the Life Cycle
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us