Household ratio guidelines for the amount of investments

Authors

  • Sherman Hanna Department of Human Sciences, Ohio State University
  • Kyoung Tae Kim Department of Consumer Sciences, University of Alabama

DOI:

https://doi.org/10.61190/fsr.v25i3.3279

Keywords:

Capital Accumulation Ratio, Financial ratios, Investing, Lifecycle theory of savings, Survey of Consumer Finances

Abstract

Some textbooks suggest using financial ratios to provide simple indicators of whether households are making appropriate financial decisions. We investigate three investment ratios mentioned in textbooks: investments to net worth, investments to annual income, and investments to total assets. We conduct regressions on respondent evaluation of the adequacy of retirement income, among households with a non-retired head in the 2013 Survey of Consumer Finances. The investments to total assets ratio has the strongest relationship to adequacy, controlling for selected household characteristics. The investments to net worth ratio (Capital Accumulation ratio) is inferior to the other two ratios.

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Published

2016-09-30

How to Cite

Hanna, S., & Kim, K. T. (2016). Household ratio guidelines for the amount of investments. Financial Services Review, 25(3), 263–277. https://doi.org/10.61190/fsr.v25i3.3279

Issue

Vol. 25 No. 3 (2016): Fall 2016

Section

New Original Submission

License

Copyright (c) 2014 Academy of Financial Services

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