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The impact of the financial and economic crisis on the diversity of private households' financial portfolios

Completed Project



Project Management

Prof. Dr. Dorothea Schäfer

Project Period

May 1, 2019 - May 31, 2020

Commissioned by

Leibniz Research Alliance Crises in a Globalised World

The past 10 years since the 2008 Lehman bankruptcy have clearly shown that global economic and financial crises present major challenges not only to banks and businesses but also to private households, requiring them a high level of shock absorption capacity. Resilience of households also depends on the stability of their investment portfolios. Diversification is an important requirement for portfolio stability. The crisis has changed the background risks as well as the income and wealth situation of private households. Low interest rates may be an incentive to increase portfolio returns through risky under-diversification. The aim of the research project is to improve knowledge of the impact of the great financial and economic crisis on households’ asset diversification decisions. We examine whether the crisis has changed the diversity of investment portfolios and what factors are responsible for it. We focus on three Eurozone countries that have been hit differently by the crisis: Spain, Italy and Germany. The database is based on the Luxembourg Wealth Study (LWS) and the national household panels. The degree of diversity of the investment portfolios is captured by two common diversity indicator, Gini-Simpson and Shannon Entropy Index. Our research helps to better understand households' response to, and impact on, households’ resilience.