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WHY HAVE U.S. HOUSEHOLDS INCREASINGLY RELIED ON MUTUAL FUNDS TO OWN EQUITY?
Author(s) -
Duca John V.
Publication year - 2005
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.2005.00159.x
Subject(s) - equity (law) , mutual fund , economics , diversification (marketing strategy) , equity risk , private equity fund , stock (firearms) , equity capital markets , business , monetary economics , financial economics , finance , private equity , mechanical engineering , marketing , political science , law , engineering
U.S. households have increasingly used mutual funds to own equity outside of retirement accounts owing to two developments. The first is a decline in equity mutual fund loads, which are negatively correlated with stock ownership rates, which have doubled owing to greater ownership through mutual funds. The second is improved confidence in future family finances. Both effects are consistent with recent models of equity participation, in which lower asset transfer costs and lower income risk induce equity investing by middle‐income households, who—in practice and owing to diversification considerations—are more likely to indirectly hold stocks through mutual funds.