Households' allocation of debts and assets: evidence from the Survey of Consumer Finances

Abstract

This paper studies household financial asset allocation taking debt structure into consideration, using the 2016 Survey of Consumer Finances (SCF) dataset. I apply a Tobit and a multinomial logit model to test the effect that debt structure has on household risky asset allocation and the joint decision of debt and asset allocations. The main conclusions are: (1) More secured debt, more risky asset investment. (2) households’ debt structure and assets share jointly decide their financial choices (3) as education increases, household would like to have more risky assets share, regardless of debt structure. Risk preferring households also have more risky assets. (4) with the increase of saving account balance, household is tending to invest more in risky assets and unsecured debts.