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Asian Review of Financial Research Vol.31 No.4 pp.557-594
Asset Allocation and Determinants of Households with Debts
Wonnho Choi* Senior Researcher, Korea Financial Investors' Protection Foundation
Key Words : Household debts,Real assets,Financial Assets,Net worth,Disposable Income


In this paper, I analyze household portfolios with and without household debts, each of which is supposedly subject to distinct financial target according to household characteristics and financial status, respectively. Four issues were identified through the 2011~2013 Household Financial Survey. First, households with debts have more financial assets in addition to real assets than those without debts, which include stocks, bonds, insurance, and mutual funds. Households with debts also own more real estate and durables such as automobiles and real assets, which is statistically significant. This result implies that households with debts invest aggressively in asset allocation and in specific assets, unlike those without debts. Second, disposable income is a main interest variable and reduces the share of financial assets at a low level but increases the share at a high level, irrespective of household debts. In contrast, At a low level, the net worth increases real assets, whereas it decreases at a high level. Thus, we conclude that households tend to diversify the portfolio risk of real assets through financial markets. Third, as previously found, household debts reduce household financial assets but reinforce the holdings of real assets, which is also prevalent in the sample of households with excessive debts. Finally, in terms of generations, middle-aged and older households with debts are more likely to prefer stocks, and significantly more likely than younger households.
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