Is Household Diversification Increasing in Wealth? Norwegian Evidence

University of Stavanger (UiS)

April 2017.

We study the diversification properties of equity portfolios using data on all Norwegian households with equity investments. While households typically have undiversified equity portfolios, diversification is increasing in wealth.

Keywords: Household Finance; Equity Portfolio Diversification

JEL Codes: D14; G02; G11;

• poster (one page summary) (pdf)
• Working Paper (pdf)
• Internet Appendix

Highlights

• We study the diversification properties of household equity portfolios.
• We use data on all Norwegian households with equity investments.
• Households typically have underdiversified equity portfolios.
• Households with higher portfolio wealth have more diversified portfolios.
• This is consistent with a transaction cost explanation of lack of diversification.