The effect of capital wealth on optimal diversification: Evidence from the Survey of Consumer Finances

Yunker, James A.; Melkumian, Alla A.

doi:10.1016/j.qref.2009.09.004

Cited by 7 publications

(10 citation statements)

References 43 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Utilizing the numerically implemented and empirically supported model of optimal diversification developed by Yunker and Melkumian (2010), the present research estimates the numerical opportunity costs (welfare losses) resulting from sub-optimal diversification on the part of the individual investor. The two decision variables in the model are the proportion of total portfolio value allocated to stocks (), and the number of stocks in the portfolio (n).…”

Section: Resultsmentioning

confidence: 99%

“…The present research suggests a third possibility: that the numerical payoff to optimal diversification is relatively minor. On the basis of a numerically implemented and empirically supported model of optimal diversification developed by Yunker and Melkumian (2010), the present research finds that the numerical opportunity costs (welfare losses) from sub-optimal diversification are quite minor even for substantial departures from the optimal levels of the decision variables. The suggestion from the research is therefore that individual investors tend to "satisfice" rather than "maximize" or "optimize" in making their diversification decisions.…”

Section: Introductionmentioning

confidence: 82%

“…Following Yunker and Melkumian (2010), we utilize a "homogeneous securities" model of portfolio choice, as follows:…”

Section: The Homogeneous Securities Modelmentioning

confidence: 99%

“…This parameter measures the investor's degree of risk aversion: the higher the  value, the more the investor is adverse to risk. The L-maximizing values of  and n are shown by Yunker and Melkumian (2010) to be as follows:…”

Section: The Homogeneous Securities Modelmentioning

confidence: 99%

“…To investigate this possibility, we utilize the optimal diversification model developed by Yunker and Melkumian (2010). This model permits a mathematically explicit solution for the optimal level of diversification in terms of proportion of total portfolio value allocated to stocks, and the number of individual stocks in the stock portfolio.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Opportunity Costs of Sub-Optimal Diversification

Yunker

Melkumian²

2012

AFR

Self Cite

View full text Add to dashboard Cite

The practical relevance of the extensive theoretical literature on optimal diversification has been brought into question by a wide variety of research that suggests individual investors utilize investment principles that are distinctly sub-optimal relative to theoretical principles. If these indications are indeed legitimate, this might be owing to the irrationality of investors, or to imperfections in the theoretical models. The present research suggests a third possibility: that the numerical payoff to optimal diversification is relatively minor. On the basis of a numerically implemented and empirically supported model of optimal diversification developed by Yunker and Melkumian (2010), the present research finds that the numerical opportunity costs (welfare losses) from sub-optimal diversification are quite minor even for substantial departures from the optimal levels of the decision variables. The suggestion from the research is therefore that individual investors tend to "satisfice" rather than "maximize" or "optimize" in making their diversification decisions. Journal of Economic LiteratureClassifications: G11 (Portfolio Choice, Investment Decisions)

show abstract

Section: Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 82%

“…Following Yunker and Melkumian (2010), we utilize a "homogeneous securities" model of portfolio choice, as follows:…”

Section: The Homogeneous Securities Modelmentioning

confidence: 99%

Section: The Homogeneous Securities Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Opportunity Costs of Sub-Optimal Diversification

Yunker

Melkumian²

2012

AFR

Self Cite

View full text Add to dashboard Cite

show abstract

Individual risk attitudes and the composition of financial portfolios: Evidence from German household portfolios

Barasinska

Schäfer

Stephan

2012

The Quarterly Review of Economics and Finance

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. /dx.doi.org/10.1016/j.qref.2011.10.001 Terms of use: Documents inan article published in the Quarterly Review of Economics and Finance 52 (2012), 1, p. 1-14, available online at: http:/ INDIVIDUAL RISK ATTITUDES AND THE COMPOSITION OF FINANCIAL PORTFOLIOS: EVIDENCE FROM GERMAN HOUSEHOLD PORTFOLIOS AbstractThis paper explores the relationship between the self-declared risk aversion of private investors and their propensity to hold incomplete portfolios of financial assets. The analysis is based on household survey data from the German Socioeconomic Panel (SOEP) that provides a reliable measure of individual attitudes toward financial risk. Our findings suggest that more risk averse households tend to hold incomplete portfolios consisting mainly of a few risk-free assets. We also find that the propensity to acquire additional assets is highly dependent on whether liquidity and safety needs are met. JEL: D14, G11

show abstract

Internet, consumer spending, and credit card balance: Evidence from US consumers

Basnet

Donou‐Adonsou

2016

Rev Financ Econ

View full text Add to dashboard Cite

Utilizing the 2013 Survey of Consumer Finances data, the present study aims to examine the role of the Internet in carrying a credit card balance among US households. The central question of this study is whether or not households with Internet access have more favorable attitudes toward incurring more credit card balance. This study further investigates whether education, income, gender, age, race, etc., make any differences in carrying credit card debt when households have access to the Internet. Our results with the Tobit model show that having access to the Internet increases the probability of carrying a positive credit card balance by 4% to 5% compared to those who do not have access to the Internet. This result does not apply to older Americans. Our results further indicate that education decreases the probability of carrying a positive credit balance for households that have access to the Internet, while income and liquid assets may have little positive effect on that probability. The results suggest that Internet leads to more debt, but education could alleviate that debt.

show abstract

The effect of capital wealth on optimal diversification: Evidence from the Survey of Consumer Finances

Cited by 7 publications

References 43 publications

Opportunity Costs of Sub-Optimal Diversification

Opportunity Costs of Sub-Optimal Diversification

Individual risk attitudes and the composition of financial portfolios: Evidence from German household portfolios

Internet, consumer spending, and credit card balance: Evidence from US consumers

Contact Info

Product

Resources

About