Habit Formation and Persistence in Individual Asset Portfolio Holdings : The Case of Italy

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Author/Editor: Sònia Muñoz
Release Date: © January, 2006
ISBN : 978-1-45186-289-8
Stock #: WPIEA2006029
Stock Status: On back-order

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This paper uses six waves of the Bank of Italy Survey of Households Income and Wealth to explore the dynamics of asset portfolio ownership. The household asset portfolio decision is a choice among discrete alternatives, and I model the problem in a multinomial framework. I focus on a particularly important feature of household portfolio behavior: the infrequency of portfolio allocation changes. I find evidence of strong unobserved heterogeneity through time-varying error components, which I interpret as taste persistence in both the risky and safe asset participation decisions. I estimate the model using the method of maximum smoothly simulated likelihood.

More publications in this series: Working Papers

More publications by: Sònia Muñoz