Ownership of Stocks and Mutual Funds: A Panel Data Analysis

This paper analyzes the ownership dynamics of stocks and mutual funds, using representative household panel data, the Dutch CentER Savings Survey 1993-1998. A bivariate dynamic binary-choice model is introduced, allowing for interactions between the two types of assets. We find that unobserved heterogeneity and state dependence play a large role for both types of assets. The positive relation between ownership of one type in one period and the other type in the next period is explained by correlated unobserved heterogeneity. A negative state-dependence effect of lagged ownership of stocks on ownership of mutual funds is found, which can be explained by the costs of shifting funds across the two forms of stockholding. © 2004 President and Fellows of Harvard College and the Massachusetts Institute of Technology.