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Empirical evaluation of the asset-allocation puzzle

Authors
Journal
Economics Letters
0165-1765
Publisher
Elsevier
Publication Date
Volume
100
Issue
2
Identifiers
DOI: 10.1016/j.econlet.2008.02.015
Keywords
  • Asset-Allocation Puzzle
  • Risk Tolerance
  • Bonds/Stocks Ratio

Abstract

Abstract We examine the portfolio-choice puzzle posed by Canner, Mankiw, and Weil [Canner, N., Mankiw, N.G., Weil, D.N., 1997. An asset allocation puzzle. The American Economic Review 87, 181–191]. From data on the portfolio composition of 470 clients of a brokerage firm, we obtain that the bonds/stocks ratio does decrease in relation to risk tolerance. This result complements the findings of CMW (1997) by focusing on actual allocations of individual portfolios rather than recommended allocations by financial advisors.

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