| This dissertation sets forth a theoretical model of asset selection in the presence of market imperfections including taxation, indivisible securities, short-sale constraints, and the existence of non-marketable assets (such as pension wealth and human capital). The theoretical model is used to test empirically several hypotheses regarding the determinants of individual investor portfolio selection.;Second, it considers the role of non-marketable assets (pension wealth and human capital) in portfolio selection. Mayers (1972; 1973) shows that the portfolio effect of a non-marketable asset is to reduce the discrete demand for those marketable assets that generate returns positively correlated with those of the non-marketable asset. The results of this dissertation confirm Mayers' theoretical result. Those individuals covered by a defined contribution plan display a reduced demand for equity securities, and there is evidence of a negative relationship between pension coverage and the demand for Individual Retirement Accounts (IRAs) and Keogh plans. Furthermore, the hypothesis that investors increase leverage in an attempt to reverse the non-marketability of human capital and pension coverage is confirmed by the data.;Finally, this dissertation investigates the demand for IRAs and Keogh plans. The results do not support the popular notion that such investments are used by the wealthy purely as a means of tax avoidance. Of course, there exists a positive relationship between the demand for voluntary retirement investments and marginal tax rates. However, such assets appear to be substituted for private pension coverage, indicating that they are viewed as savings for retirement. Furthermore, the results do not indicate that wealthier individuals have a greater demand for retirement accounts relative to average investors.;The dissertation has three main objectives. First, it examines the impact of life cycle considerations on portfolio choice. Age is found to be related positively to the demands for mortgage financing, bonds, and liquid assets. The results suggest the hypothesis that age may be related to portfolio selection through a very complex combination of hedging, liquidity, and bequest motives. |
