Heterogeneity in asset allocation decisions: Empirical evidence from Switzerland |
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| Authors: | Wolfgang Drobetz Peter Kugler Gabrielle Wanzenried Heinz Zimmermann |
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| Institution: | 1. School of Business Administration, Contemporary Business and Trade Research Center, Zhejiang Gongshang University, Hangzhou, 310018, China;2. School of Business Administration, Institute of Government Decision-making and Performance Evaluation, South China University of Technology, Guangzhou 510641, China;3. School of Management, Zhejiang University, Hangzhou 310058, China;1. Center of Mathematics for Applications, University of Oslo, PO Box 1053 Blindern, N-0316 Oslo, Norway;2. Center of Mathematics for Applications, University of Oslo, PO Box 1053 Blindern, N-0316 Oslo, Norway;3. Universiti Malaysia Terengganu, Faculty of Science and Technology, 21030 Kuala Terengganu, Terengganu, Malaysia |
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| Abstract: | We analyze the heterogeneity in asset allocation decisions of different investor groups in response to changes in the macroeconomic environment. Using a new data set that includes the monthly portfolio holdings of private, commercial, and institutional investors deposited with Swiss banks, we estimate the relationship between equity and bond holdings and common business cycle indicators. Regression analysis indicates that private investors do not systematically move from stocks into bonds by selling stocks to institutional investors and purchasing bonds from them in adverse macroeconomic states. A VAR-error correction framework including cointegration and error correction restrictions suggests that the investment behavior of commercial investors leads and private investors follow in their investment decisions only slowly over time. The asset allocation decisions of institutional investors are not affected by the actions of private and commercial investors. Our results refute a principle of “institutional irrelevance”. |
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