Weagley, 1991

Weagley, 1991


“Investor Portfolio Allocation” (Financial Counseling and Planning, Volume 2, 1991)



By: ROBERT O. WEAGLEY AND COLLEEN F. GANNON



CONTACT: ROBERT O. WEAGLEY (E-MAIL: Robert_O._Weagley@muccmail.missouri.edu)



POSTAL: University of Missouri, Columbia, MO 65211



PHONE: 314-882-9651 FAX: (314) 884-4807



Wealth and stage in the life cycle affect investors’ willingness to assume investment risk. This proposition was tested
in an examination of investor asset allocations among the asset categories of savings, housing, financial securities, and
retirement investments. It was found that, on average, the diversification of household asset portfolios toward riskier
investment categories increases as wealth increases. Whether this result follows from a decreasing relative risk
aversion utility function or a combination of transaction costs and consumer lack of knowledge about alternative
investments is unknown. In addition, as households age, they take on an increasing amount of investment risk until
imminent retirement reduces the risk of portfolios.



KEY WORDS: assets, investment management, risk aversion