A Study On The Influencing Factors And Wealth Effect Of Financial Asset Allocation Of Urban Households

Over the past 40 years,we have continued to open and reform.Meawhile,China’s productivity and national income have been greatly improved,and many families use their idle funds for financial investment.At present,China’s household financial asset allocation presents the characteristics of diversification and diversification.Allocating household financial assets properly can not only increase the family wealth,but also promote the household consumption of Chinese residents.This paper studies the urban family financial asset selection theory,modern asset portfolio theory and asset wealth effect theory,mainly doing the following work:Firstly,theoretical analysis of urban household financial asset allocation and wealth effect.Firstly,based on the factual data,the paper introduces the income structure of urban residents,the total distribution of urban family assets,and the asset structure of urban families.From the statistical data,the real disposable income of Chinese households continues to rise.What is particularly noteworthy is that the holding rate of financial assets of Chinese urban households is high,and the proportion of property income in the income structure has been a great leap,reflecting the role of household asset allocation in recent years.Then it discusses the endogenous power of household asset allocation under the theoretical framework,analyzes the mechanism of household financial asset allocation and the wealth effect of household asset allocation.From the baseline model of household allocation of financial assets,the endogenous motivation is reflected in the pursuit of excess returns on assets and the preventive motivation against future uncertainties.At the same time,the choice of a household to hold a portfolio of financial assets depends crucially on the level and volatility of returns on specific financial assets and the household’s income,which are in fact closely linked to factors such as individual household characteristics,risk characteristics,economic characteristics,financial characteristics,social network factors and macroeconomic factors.Second,based on the theoretical analysis,the factors influencing urban households’ participation in financial asset allocation were further investigated,using the proportion of financial assets(financial assets/total assets),risky financial asset holdings and the proportion of risky financial assets(risky financial assets/total financial assets)as measures.After dealing with endogeneity caused by sample selectivity bias,the results show that the household size in the personal characteristics of the household head,the risk preference factor in the risk characteristics dimension and the level of financial cognition in the financial characteristics dimension are the most critical factors affecting the allocation of financial assets of urban households,and all three key factors are related to the household’s tolerance for risk,implying that what determines the household’s financial asset allocation weight is more likely to be the household’s preference for risky financial assets among them.In addition,gender,age,education and health status are also important factors influencing the allocation of risky financial assets,and income status also shows a significant positive effect,suggesting that households with higher incomes are more risk-accepting.Overall,on the other hand,the macroeconomic level has no significant impact.Further grouping(three dimensions of region,income and education)reveals that the higher the depth of regional financial development,the more low-risk financial assets are allocated to households in the east,and each key factor mainly affects high-income urban households,while the key effects of gender of household head,age and interpersonal expenditure on the financial asset allocation of urban households are mainly found in the group of highly educated households.The key influences of health status,depth of local financial development and the household’s own trust in society,however,are mainly found in the group of urban households with low educational attainment.Thirdly,after identifying the various factors that influence the financial asset allocation of urban households,it further explores which factors can enhance the effectiveness of the financial asset allocation of urban residents.Using the six dimensions of explanatory variables used in the analysis of the financial asset allocation behaviour of urban households,the Sharpe and Sortino ratios,which represent the effectiveness of households’ financial asset portfolios,were constructed and regression analyses were conducted using the Heckman two-step method.The study found that,overall,the three variables of socio-economic level,health insurance participation and risk preference had the greatest influence on the effectiveness of urban households’ financial asset allocation,and further found that the level of pension insurance participation,health insurance participation and education level had a greater influence on the diversity of their financial asset allocation.By grouping region,income and education level,it is found that there is indeed significant heterogeneity in the effectiveness and diversity of the financial asset portfolios of urban households in China in these three areas.Among them,the impact of macroeconomic development level differs significantly between eastern and central and western regions,the impact of the social network dimension differs more between high-and low-income households,and the effectiveness and diversity of financial asset allocation of low-educated households responds to changes in each impact factor to a greater extent.Fourth,this paper further analysed the influence of urban households’ financial asset allocation on their consumption,so as to explore the wealth effect of financial asset allocation.On average,the consumption of urban households that focus on risky financial asset allocation increases significantly,manifesting as a significant increase in developmental and enjoyment consumption,while their allocation to low-risk financial assets exerts a saving effect,effectively substituting for consumption and thus reducing consumption in the current period.A further study of the income groupings of households found that the wealth effect in the full sample manifested itself mainly in high-income urban households,with a smaller proportion of low-income urban households holding risky financial assets themselves,and the increase in consumption brought about by these households through their allocation to risky financial assets was higher than that of high-income households,but this increase in consumption was across-the-board and did not show significant structural This increase in consumption is across the board and does not show any significant structural change.From the results of the contribution margin estimated by the Shapley value decomposition method,the main reason for this phenomenon is that the consumption behaviour of low-income urban households is overly influenced by the individual characteristics of the head of household,and the wealth effect of financial asset allocation of urban households cannot be highlighted.Based on this,improving the financial literacy of urban households,raising their awareness of risk and thus removing the psychological barriers to participation in the financial market,so that households in China can effectively allocate risky financial assets,will contribute to the enhancement of social welfare.Relative to the existing research,the main innovations of this paper are summarized as follows:(1)Based on the characteristics of the financial asset allocation of urban households in China,and taking the household’s optimal decision to pursue utility maximisation as the starting point,a theoretical analysis of the mechanisms by which various factors affect the allocation of household financial assets was conducted,and it was found that the most crucial mechanism works by influencing the risk preferences of urban households and their level of financial awareness.(2)After identifying the key factors influencing the financial asset allocation behaviour of urban households,the issue of the effectiveness of urban households’ financial asset allocation is further analysed,and the key factors affecting the effectiveness and diversity of the financial asset portfolios of urban households in China and the heterogeneous differences are identified,making the analysis of the factors influencing the financial asset allocation of urban households more relevant.(3)It is proposed that only by enhancing urban households’ allocation of risky financial assets can consumption be effectively increased and social welfare enhanced,which is of great practical significance in promoting the rationalisation of urban households’ financial asset allocation behaviour and the healthy development of family finance in China.