Using pooled cross-sectional data from the Surveys of Consumer Finances, and new panel data from TIAA-CREF, we examine the empirical relationship between age and the fraction of wealth held in the stock market. We illustrate and discuss the importance of the well-known identification problem that prevents unrestricted estimation of age, time and cohort effects in longitudinal data. We also document three important features of household portfolio behavior: significant non-stockownership, wide-ranging heterogeneity in allocation choices, and infrequency of active portfolio allocation changes (almost half of the sample members made no active changes to their portfolio allocations over our nine-year sample period). When estimating portfolio share equations, we consider three separate exclusion restrictions: excluding time effects, cohort effects, and finally age effects. We find no evidence supporting a gradual reduction in portfolio shares with age. There is some tendency for older individuals to shift completely out of the stock market around the time of annuitizations and withdrawals.


TIAA-CREF Portfolio Data
TIAA-CREF (Teachers Insurance and Annuity Association-College Retirement Equities Fund)
Survey of Consumer Finances
Board of Governors of the Federal Reserve System