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

Abstract

This thesis aims to examine how Swedish households have rebalanced their investments in the risky portfolio from 2001 through 2014, using direct holdings in stocks as a proxy for investment in the risky portfolio that consists of risky mutual funds and direct holdings in stocks. Furthermore, investigations of how different income levels and age groups have coped with the financial crisis of 2008 are carried out by the authors. The statistics used in this thesis are from Statistics Sweden as well as from the Swedish investment fund association. The method of investigation, regressions and theoretical framework have been developed primarily from the findings of Calvet, Campbell, Sodini (2007), Calvet, Campbell, Sodini (2009) and Campbell (2006). This thesis shows, among other things, a tendency for Swedish households to rebalance their investments in risky shares based on their previous weight in risky shares 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 levels seem to have dealt with the financial crisis in diametrically different ways. To generalise, younger individuals rebalanced their risky share portfolio marginally, below-average income earners yielded insignificant results, and middle-aged individuals and above-average income earners held their weight in risky shares relatively constant. Elderly individuals and high-income earners, in comparison, rebalanced towards a greater weight invested in risky shares.