Household portfolio allocation and stock market impressions: evidence from Japan households

This study investigates the relationship between individual impressions of financial markets and household portfolio decisions in Japan. We analyse data from the Keio Household Panel Survey (KHPS) to examine how impressions about financial markets influence current and planned asset holdings. Initially, our findings reveal statistically and economically significant relationships between distinct impressions and current asset allocations and asset accumulation. The results relating to impressions about profitability and uncertainty remain robust when employing an instrumental variable approach that utilises historical impressions to control for potential endogeneity. Additionally, we explore the influence of current impressions on long-term financial planning, demonstrating their potential importance in shaping future planned asset allocation. These findings suggest that addressing misconceptions and influencing impressions regarding financial markets could potentially improve household financial well-being.