Rebalancing of stockholdings with evidence from cohort analysis - An empirical study of households´ rebalancing of stockholdings as a proxy for investments in the risky portfolio

University essay from Göteborgs universitet/Företagsekonomiska institutionen

Abstract: This thesis aims to examine how Swedish households have rebalanced theirinvestments in the risky portfolio from 2001 through 2014, using direct holdings instocks as a proxy for investment in the risky portfolio that consists of risky mutualfunds and direct holdings in stocks. Furthermore, investigations of how differentincome levels and age groups have coped with the financial crisis of 2008 are carriedout by the authors. The statistics used in this thesis are from Statistics Sweden as wellas from the Swedish investment fund association. The method of investigation,regressions and theoretical framework have been developed primarily from thefindings of Calvet, Campbell, Sodini (2007), Calvet, Campbell, Sodini (2009) andCampbell (2006).This thesis shows, among other things, a tendency for Swedish households torebalance their investments in risky shares based on their previous weight in riskyshares as well as the gross return on risky shares during the time period studied (2001-2014). Moreover, this thesis demonstrates that different age groups and income levelsseem to have dealt with the financial crisis in diametrically different ways. Togeneralise, younger individuals rebalanced their risky share portfolio marginally,below-average income earners yielded insignificant results, and middle-agedindividuals and above-average income earners held their weight in risky sharesrelatively constant. Elderly individuals and high-income earners, in comparison,rebalanced towards a greater weight invested in risky shares.

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