The Effect of the Financial Crisis of 2008 on Swedish Household Portfolios

Abstract

The aim of this thesis is to examine whether Swedish households have changed the composition of their portfolio as a consequence of the financial crisis and to investigate whether they have become more reluctant to invest in the financial markets. To examine how the Swedish household portfolios have changed over time, risk measures such as standard deviation and beta will be used as well as performance measures such as the Sharpe ratio, Treynor ratio and Jensen’s alpha. Furthermore, regressions will be made in order to determine whether the financial assets show a significant trend and whether wealth can predict asset allocation within the Swedish household portfolios. The results indicate that there is a significant change of the weights within the portfolio for all the assets, except for foreign shares. In addition, wealth fluctuations do appear to have predictive power over asset allocation, which strengthens the idea that households react as a response to market turbulence. At the same time, Swedish households did not de-risk their portfolios after the crisis and thus, it can be concluded that they have accepted the increment of the risk taken. In addition, the analysis of the performance of the portfolio indicates that there is not a significant change of the portfolio performance after the crisis of 2008.