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We merge administrative information from a large German discount brokerage firm with regional data to examine if financial advisors improve portfolio performance. Our data track accounts of 32,751 randomly selected individual customers over 66 months and allow direct comparison of performance across self-managed accounts and accounts run by, or in consultation with, independent financial advisors. In contrast to the picture painted by performance records, econometric analysis that corrects for the endogeneity of the choice of having a financial advisor suggests that advisors are associated with lower total and excess account returns, higher portfolio risk and probabilities of losses, and higher trading frequency and portfolio turnover relative to what account owners of given characteristics tend to achieve on their own. Regression analysis of who uses an IFA suggests that IFAs are matched with richer, older investors rather than with poorer, younger ones.

We discuss the current state of stockownership among households in major European countries, drawing parallels and contrasts with the US experience. Our analysis of detailed microeconomic data documents increasing stock market participation and persistent differences across countries in our sample: many more US, UK and Swedish households participate in the stock market than is the case in the Netherlands and, especially, in France, Germany, and Italy. At the individual household level, the data indicate that stock market participation correlates robustly with wealth and education, which have only small effects, however, on the asset share invested in stocks by households who do participate. These empirical results point to the relevance of participation costs, and we find that indicators of such costs are consistent with the observed pattern of participation across countries. Over time, higher participation was brought about by lower participation costs. We discuss the possible impact of market entry by households with different characteristics, and outline types of policies that could mitigate any undesirable stock market effects of cheaper and broader participation. Copyright (c) CEPR, CES, MSH, 2003..

We document and study international differences in both ownership and holdings of stocks, private businesses, homes, and mortgages among households aged fifty or more in thirteen countries, using new and comparable survey data. We employ counterfactual techniques to decompose observed differences across the Atlantic, within the US, and within Europe into those arising from differences in population characteristics and differences in economic environments. We then correlate the latter differences to country-level indicators. Ownership across the range of the assets considered tends to be more widespread among US households. We document that shortly prior to the current crisis, US households tended to invest larger amounts in stocks and smaller ones in homes, and to have larger mortgages in older age, even controlling for characteristics. This is consistent with the high prevalence of negative equity associated with the current crisis. More generally, we find that differences in household characteristics often play a small role, while differences in economic environments tend to explain most of the observed differences in ownership rates and in amounts held. The latter differences are much more pronounced among European countries than among US regions, suggesting further potential for harmonization of policies and institutions.

We study the infinite-horizon model of household portfolio choice under liquidity constraints and revisit the portfolio specialization puzzle. We show why the puzzle is robust to several model variations, and argue that positive correlation between earnings shocks and stock returns is unlikely to provide an empirically plausible resolution. We find that relatively small fixed costs for stock market entry are sufficient to deter stockholding because, for a plausible range of parameter values, households can achieve desired consumption smoothing with small or zero holdings of stocks. Such costs could arise from informational considerations, sign-up fees, and investor inertia. * Manuscript for an excellent recent survey of the literature on consumption. 143 10 Although these studies generally suggest that individual income changes follow an MA(2), the MA(1) is found to be a close approximation.

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This paper presents an overview of the main findings of an international project on Household Portfolios coordinated by the authors. Contributions to the project deal with the state of the art in analytical, computational, and econometric methods of analysis of household portfolio choice, identify stylized facts and trends observed in five major countries, and discuss issues relating to the portfolios of two important population groups, namely the elderly and the rich. In this paper, we integrate the main findings of the project, compare portfolio behavior across countries, and contrast theoretical predictions to empirical findings. This allows us to identify a number of stylized facts and portfolio puzzles that future theoretical and empirical research should attempt to analyze and resolve. Acknowledgements:The paper is a draft of the Introduction to a volume on Household Portfolios edited by the authors, which is to be published by MIT Press. We are grateful to all participants of the international project on Household Portfolios, not only for their contributions but also for numerous discussions over the past two years. We thankfully acknowledge the generous financial support of the Project on Finance and Consumption in the

Can concern with relative standing, which has been shown to influence consumption and labor supply, also increase borrowing and the likelihood of financial distress? We find that perceived peer income contributes to debt and the likelihood of financial distress among those who consider themselves poorer than their peers. We use unique responses describing perceived peer characteristics from a Dutch population-wide survey to handle two major challenges of uncovering social interaction effects on borrowing: (1) debts, unlike conspicuous consumption, are often hidden from peers and (2) location is missing in anonymized data. We employ several approaches to uncover exogenous, rather than correlated, effects. (JEL G11, E21)The role of relative standing has been explored in many contexts, including consumption behavior and labor supply, 1 but less attention has been paid to how "catching up" or "keeping up" with peers is financed. In particular, almost no attention has been paid to whether perceptions of relative standing contribute to borrowing and to the potential for financial distress. Are people who perceive themselves as poorer than their social circle more likely to borrow and, ifWe are grateful to an anonymous referee and Alexander Ljungqvist (editor) for their very helpful comments. We would also like to thank