Search

Purpose: The purpose of the study is to investigate the impact of asset redeployability on the level of corporate cash holdings. Design/methodology/approach: The authors use regression analysis to examine the relation between asset redeployability and corporate cash holdings. Findings: Using a large panel sample of US public firms from 1990 to 2020, the authors find a significant positive relation between asset redeployability and cash, which suggests that firms with more redeployable assets hold more cash. Originality/value: The authors contribute to a growing literature in accounting and finance that investigates the impact of asset redeployability on firm characteristics and also contribute to the literature on the determinants of cash holdings. [ABSTRACT FROM AUTHOR]

Habit persistence is examined for six asset demand categories using U.S. data and a dynamic forward‐looking model. We find habit persistence is greater for more liquid assets compared to riskier assets and may in part explain low holdings of riskier assets. Cash assets are found to be substitutes with other liquid assets under habit formation. Consistent with portfolio analysis, the riskier asset categories of money market mutual funds and bonds are found to be complements in use. The three more risky asset categories have budget elasticities greater than unity indicating that in the long run consumers are more likely to turn to these assets as their wealth increases. [ABSTRACT FROM AUTHOR]

In this paper, we consider the construction of a sales management strategy for a highly liquid asset trading at the market. The proposed strategy goal is to maximize the weighted average price of sales. It is assumed that the market price follows a geometric Brownian motion process in which drift and volatility coefficients are random functions of time. The important feature of the given management is that the volumes of assets in the succession of buy and sell executed bargains are calculated exclusively on the basis of the observed market prices rather than on the model coefficient values. In contrast to the management proposed earlier in this study, obligatory realization of some minimum volume of assets on the given time period is demanded. Examples of real-world markets trade demonstrating the imposed constraints effect on the weighted average price values obtained within the constructed management are given. [ABSTRACT FROM AUTHOR]

Firms until recently were effectively constrained to hold liquid assets in non-interest-bearing accounts. As a result, the cost of capital of firms'liquid-assets portfolios exceeded the return, especially when the risk-free interest rate was high. The spread between cost and return is the cost of carry. Changes in the cost of carry explain the dynamics of corporate "cash" holdings both in the United States and abroad, and the level of cost of carry explains the level of liquid-asset holdings across countries.We conclude that current US corporate cash holdings are not abnormal in a historical or international comparison. [ABSTRACT FROM AUTHOR]

Models based on factors such as size or value are ubiquitous in asset pricing. Therefore, portfolio allocation and risk management require estimates of the volatility of these factors. While realized volatility has become a standard tool for liquid assets, this measure is difficult to obtain for asset pricing factors such as size and value that include smaller illiquid stocks that are not traded at a high frequency. Here, we provide a simple approach to estimate the volatility of these factors. The efficacy of this approach is demonstrated using Monte Carlo simulations and forecasts of the market volatility. [ABSTRACT FROM AUTHOR]

We develop a search-theory of asset liquidity which gives rise to endogenous financing constraints on investment in an otherwise standard dynamic general equilibrium model. Asset liquidity describes the ease of issuance and resaleability of private financial claims, which is the outcome of a costly search-and-matching process for such claims implemented by financial intermediaries. Limited liquidity of private claims creates a role for liquid assets, such as government bonds, to ease financing constraints. We show that endogenising liquidity is essential to generate positive co-movement between asset liquidity and asset prices. When the cost of intermediating funds to entrepreneurs rises, investment and output fall whereas the hedging value of liquid assets increases, driving up liquidity premia. In the United States, such intermediation cost shocks can account for at least 37% of the variation in output, and more than 78% of the variation in liquidity premia. [ABSTRACT FROM AUTHOR]

• Liquid assets and beliefs about inflation. • New information results in revisions of inflation expectations. • New information results in changes in liquid assets. This paper investigates the relationship between firms' inflation expectations and their holdings of liquid assets. We implement a new quantitative survey of firms' expectations about inflation in New Zealand. We find that firms that hold more shares of liquid assets systematically report lower inflation expectations. Moreover, we implement an experiment by providing firms new exogenous information about recent inflation dynamics. This experiment allows us to assess how firms respond to new information in terms of belief revisions and firm-level decisions. [ABSTRACT FROM AUTHOR]

We study the relation between asset liquidity and stock liquidity. Our model shows that the relation may be either positive or negative depending on parameter values. Asset liquidity improves stock liquidity more for firms that are less likely to reinvest their liquid assets (i.e., firms with less growth opportunities and financially constrained firms). Empirically, we find a positive and economically large relation between asset liquidity and stock liquidity. Consistent with our model, the relation is more positive for firms that are less likely to reinvest their liquid assets. Our results also shed light on the value of holding liquid assets. [ABSTRACT FROM PUBLISHER]

The intertemporal CAPM predicts that an asset's price is equal to the expectation of the product of the asset's payoff and a representative consumer's intertemporal marginal rate of substitution. This paper develops an alternative approach to asset pricing based on corporations' desire to hoard liquidity. Our corporate finance approach suggests new determinants of asset prices such as the distribution of wealth within the corporate sector and between the corporate sector and the consumers. Also, leverage ratios, capital adequacy requirements, and the composition of savings affect the corporate demand for liquid assets and, thereby, interest rates. [ABSTRACT FROM AUTHOR]

Individual development accounts (IDAs) help low‐income families save by providing a savings account and a potential match toward personal savings for specific investments, such as a first home, business capitalization, or postsecondary education and training. The Assets for Independence (AFI) program uses AFI IDAs—commonly coupled with financial education—with the goal of helping low‐income households achieve greater self‐sufficiency. Using a randomized controlled trial, we evaluate the impact of AFI after one year and find that the median level of liquid assets was $657 higher for the treatment group than the control group (before matching funds). We also find that the treatment (vs control) group experienced less material hardship (by 34%) and was less likely to use nonbank check‐cashing services (by 39%). [ABSTRACT FROM AUTHOR]

The article estimates the substitutability between money and other financial assets. The article attempts to estimate the degree of money substitutability, and its focus is on "near-money" assets rather than on the entire spectrum of liquid assets. The article estimates the degree of substitutability between three assets, which are money, bank savings and time deposits, and non-bank savings institutions' savings deposits. The article's conclusions are that there exists little or no substitutability between money and these near-money assets, but that the two kinds of savings assets are highly substitutable with each other.

The article presents an analysis of short-run bank investment behaviors, particularly examining portfolio adjustments of liquid assets in response to relative yield holding changes, fund availabilities, and deposits stability. Empirical testing of several bank assets is provided, including total cash assets, excess reserves, short-term government securities, and long-term municipal securities. Time series data from 1968 to 1973 is utilized. Conclusions are offered suggesting that concerns of slow transmission of monetary policy shifts are unnecessary.

The article discusses liquidity ratios and the monetary experience in Great Britain in the late 1950s. The author examines the possible efficacy of prescribed liquidity ratios as a tool of monetary policy. The author states that a 30 per cent ratio that was in use as the conventional liquid-asset-deposit relationship, was equally as faulty after 1951 as during the pre-war period. He explains that the proportion which such assets bore to deposits has varied widely within each year for each particular bank even though the banks have kept a substantial fraction of their assets in liquid form.

Asset quality is a key indicator of sound banking. However, it is difficult for banking regulators and investors to assess it in the absence of a common, cross-border scheme to classify assets. Currently, no standard is applied universally to categorise loans, the most sizeable asset on banks’ balance sheets. As a corollary, definitions of non-performing loans (NPLs), despite recent steps towards greater harmonisation, continue to vary between jurisdictions. This paper offers a comprehensive analysis of NPLs and considers variations in the treatment of NPLs across countries, accounting regimes and firms. The paper relies on a multidisciplinary perspective and addresses legal, accounting, economic and strategic aspects of loan loss provisioning and NPLs. A harmonised approach to NPL recognition is particularly desirable, in view of the fact that IFRS 9, the new accounting standard on loan loss provisioning, will be mandatory from January 2018. IFRS 9 changes the relationship between NPLs and provisions, by relying on greater judgement to determine provisions. The potential for divergence makes the need for comparable indicators against which to assess asset quality all the greater. [ABSTRACT FROM AUTHOR]

Objective: Existing research on savings and liquid-asset accumulation is largely quantitative and focuses on descriptions of how income inequality leads to the ability or inability to save. What has been left out of this body of research is an in-depth exploration of the role family composition may play in the way that households accumulate liquid assets. The purpose of this research is to understand how lower and higher income single- and two-parent families characterize reasons for saving, obstacles to saving, and strategies to save. Method: A diverse sample of 42 parents of kindergarteners were asked questions about household saving at 2 time points. Results: Compared to other family types, lower income single mothers report little savings and aspirations toward very short-term savings horizons as a result of persistent income shortfalls. Unlike two-parent households, lowerincome single mothers discussed their reasons for avoiding mainstream financial institutions and opting to use cash instead. Conclusions: To alleviate economic inequality and improve households' ability to withstand financial volatility, social work practice and policy should consider implementing interventions that are responsive to the unique experiences of poverty by family composition. [ABSTRACT FROM AUTHOR]

The article reports on the substitution between money and liquid assets with commentary on research by economists John R. Moroney and Barry J. Wilbratte. Moroney and Wilbratte used a variation of a utility maximization model and derived regression equations from wealth maximization with transaction constraints in their research. However, the definitions of wealth they used create errors. The periods in which liquid assets enter the equations are different and so they result in different demand equations.

This article presents a discussion of a paper that examined how external financing activities of firms are usually accompanied by a decrease in their equity values. Some theories that have examined this concept are the theory of signalling with differential information, the theory of agency and the theory of liquidity, which was examined in the observed paper. The author notes that firms have reasons to hold money or liquid assets in order to maintain opportunities to invest in profitable projects. The author discusses how firms meet this liquidity need and offers suggestions on how to improve the model of liquidity theory.

The article focuses on the role of financial non-money assets as substitutes for money in the corporate business sector. It states that economist Milton Friedman's criterion for substitutability is that alterations in money-substitute holdings have to change in the opposite direction from money holdings changes. It mentions that using this definition, which includes time deposits, and examining data for annual flow-of-funds, the behavior of money and government securities from the late 1940s to 1967 contradict the conclusion Friedman made regarding their behavior. It states that aggregate changes in liquid financial asset holdings such as finance papers, government securities, and time deposits, display the same behavior expected for money-substitutes.

Copyright of Ecos de Economía is the property of Universidad EAFIT and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This study utilizes the 1997 National Longitudinal Survey of Youth to examine the relationship between financial literacy, conscientiousness, and asset accumulation among young adults. Findings indicate that both conscientiousness and financial literacy are consistent predictors of asset accumulation among young Americans. A one-standard-deviation increase in conscientiousness is correlated with a 40% increase in net worth, a 53% increase in illiquid asset holdings, and a 33% increase in liquid asset holdings. A one-standard-deviation increase in financial literacy is correlated with a 60% increase in illiquid asset holdings and a 30% increase in liquid asset holdings. Financial literacy moderates the effect of conscientiousness on net worth. These findings suggest that conscientiousness and financial literacy are important factors and that policies and programming with a dual emphasis on increasing conscientiousness and financial literacy are likely to have a positive impact on consumer savings and asset-building. [ABSTRACT FROM AUTHOR]

Using rural household data from the China Household Income Project ( CHIP) 2002, this article provides an analysis of different effects of household assets independent of family income on children's school enrollment and parental aspirations for education, examining both outcomes by children's gender. The study first compared the responsiveness of boys' and girls' enrollment with the improvement of household assets, measured as liquid assets and net worth, relative to family income. The multivariate regression analysis further detected the effects of household assets on both boys' and girls' school enrollment and parental aspirations for their future education. Statistical results show that, compared with family income, household assets matter more for girls' schooling than for boys'. In addition, household net worth was found to be significantly associated with parental aspirations for children's education regardless of gender. This study, albeit exploratory, sheds light on child welfare and education policies in rural China. [ABSTRACT FROM AUTHOR]

Kim K-S, Kim YM. Asset poverty in Korea: levels and composition based on Wolff's definition The main purpose of the study was to lay the groundwork for establishing a more effective asset-building policy through accurate measurement and analysis of the level and composition of the asset-poor Korean population. We defined four asset poverty lines according to the concepts of basic needs, limited period of time and wealth-type resources from Wolff's operational definition. The size of the Korean asset-poor population, when considered from the perspectives of net assets and liquid assets, was found to remain around 12.7-13.2 and 32.8-36.5 per cent respectively. This study suggests that it is necessary to establish a differentiated asset-building policy by age group and to prepare more realistic alternatives to solve housing problems, while empirically verifying the need for an accurate asset poverty line which reflects the definition of asset poverty. [ABSTRACT FROM AUTHOR]

A problem that often arises in applied finance is one where decision-makers need to choose a value for some parameter that will affect the cash flows between two parties involved in the operation of an illiquid asset. Because the values of the cash flows also depend on various unobservable parameters, identifying the value of the policy parameter that achieves the desired allocation between the parties is no simple task, often resulting in disputes and the invocation of ad hoc approaches. We show how this problem can be solved using an extension of the well-known ‘implied volatility’ technique from option pricing, and apply it to the determination of equilibrium rental rates on ground leases of commercial land. [ABSTRACT FROM AUTHOR]

New evidence on the transmission of monetary policy to the economy is provided through an analysis of the effects of a restrictive monetary policy shock on Italian flow of funds over the period 1980 to 2002. Firms reduce issuance of debt and decrease the acquisition of financial assets, providing no support for the existence of strong financial frictions. Following the shock, in the first quarter households increase short-tem liabilities and diminish the acquisition of liquid assets and shares. The public sector increases net borrowing during the first 2 years. Financial corporations decrease their borrowing for three quarters while in the same period the foreign sector increases borrowed funds. We claim that our results shed new light on the role of the financial decisions of the economic sectors in the transmission mechanism of monetary policy. [ABSTRACT FROM AUTHOR]

We study the stock price and trading volume reactions to dividend initiations by high-tech firms relative to those by non-high tech firms. We find significant positive cumulative abnormal returns and abnormal trading volume for both high-tech and non-high tech firms surrounding dividend initiations. However, when we control for variables such as size and dividend yield, stock returns and trading volume around dividend initiations are higher for high-tech firms than for non-high tech firms. We also find evidence that stock returns and trading volume for high-tech firms are higher with increases in liquid assets, although the volume reaction to increases in liquid assets is stronger than the return reaction, perhaps indicating clientele shifts. Overall, our findings convey stronger investor reaction to dividend initiations by high-tech firms, especially those with sufficient liquid assets. [ABSTRACT FROM AUTHOR]

Firm behavior is examined during a period of financial repression in Brazil. Empirical findings indicate that firms experiencing rising inflation rates: (1) increase their capital stock while reducing liquid asset holdings; (2) experience increases in the productivity of capital (i.e. a rise in the output-capital ratio); (3) increase the scale of the firm's operations both because of the rising capital productivity and the greater quantity of capital; (4) most firms increase liquid asset holdings as they expand production, although Brazilian firms do so at about twice the rate of multinational firms; (5) do not change overall inventory holdings; however, inventories increase as output rises for multinational firms while for Brazilian firms inventories decrease as output rises; and (6) firms that are more likely to face financial constraints expand their scale of operations at a faster rate as they accumulate more debt. [ABSTRACT FROM AUTHOR]

The article discusses the Diamond-Dybvig model that examines banks' issuance of more liquid deposits than their assets and their vulnerability to bank runs. With this vulnerability, banks and governments alike have instituted several policies and deposit insurance schemes to stop bank runs. The author elaborates that banks issue demand deposits to provide investors and entrepreneurs with liquid assets.

Abstract: This paper empirically investigates whether changes in macroeconomic volatility affect the efficient allocation of non-financial firms'' liquid assets. We argue that higher uncertainty will hamper managers'' ability to accurately predict firm-specific information and induce them to implement similar cash management policies. Contrarily, when the macroeconomic environment becomes more tranquil, each manager will have the latitude to behave more idiosyncratically as she can adjust liquid assets based on the specific requirements of the firm, bringing about a more efficient allocation of liquid assets. Our empirical analysis provides support for these predictions. [Copyright &y& Elsevier]

Abstract: This paper discusses the joint unpredictability of asset returns on two markets. It provides a necessary condition for joint unpredictability in term of distance between information sets. We conclude that the joint unpredictability requires a condition very strong and so, in this sense, it represents a “singularity”. The result should give a theoretical support to the empirical evidence in favor of the predictability of the returns. [Copyright &y& Elsevier]

In the real market an asset is not completely liquid. An investor should plan a strategy on the grounds that an asset cannot always be traded. In this paper we consider the classical Merton wealth problem, but the risky asset is not completely liquid. The liquidity is represented by the success rate of the trade and the investor can trade the asset at distributed exponentially random times. We find the value function and exhibit a procedure for an asymptotic expansion of the optimal strategy. Further we reveal some characteristics of the optimal strategy by a numerical analysis. [ABSTRACT FROM AUTHOR]

We broadly define liquid assets, or monetary assets, as any asset that can be readily sold in the market and can be held by a number of people in succession before maturity. We ask in what environment is the circulation of liquid assets essential for the smooth running of the economy. By developing a canonical model of a monetary economy (i.e., where the circulation of liquid assets is essential), we are able to examine the interaction between liquidity, asset prices, and aggregate economic activity. [ABSTRACT FROM AUTHOR]

We define a financial system to be fragile if small shocks have disproportionately large effects. In a model of financial intermediation, we show that small shocks to the demand for liquidity cause either high asset-price volatility or bank defaults or both. Furthermore, as the liquidity shocks become vanishingly small, the asset-price volatility is bounded away from zero. In the limit economy, with no shocks, there are many equilibria. However, if banks face idiosyncratic liquidity shocks, then the only equilibria that are robust to the introduction of small aggregate risk involve stochastic consumption as well as volatile asset, prices. [ABSTRACT FROM AUTHOR]

In this paper, we explore the result of Epstein [Int. Econ. Rev. 21 (1980) 269] using a more general utility function that incorporates Kreps–Porteus preferences. We demonstrate that consumers postpone a commitment to non-durable consumption and hold more liquid assets not only by a high degree of intertemporal substitution but also by a preference for the early resolution of uncertainty. We also discuss a potential advantage of Kreps–Porteus preferences in examining the interaction between asset pricing and liquidity demand. [Copyright &y& Elsevier]

We study the optimal valuation of real assets when true asset values are unobservable. In our model, the observed value cointegrates with the unobserved true asset value to cause serial correlation in the time series of observed values. Autocorrelation as well as total variance in the observed value are used to calculate an efficient unbiased estimate of the true asset value (the time-filtered value). The optimal value estimate is shown to have three time-weighted terms: a deterministic forward value, a comparison of observed values with previously determined time-filtered values, and a convexity correction for incomplete information. The residual variance measures the precision of the value estimate, which can increase or decrease monotonically over time as well as display a linear or nonlinear time trend. We also show how to revise time-filtered estimates based on the arrival of new information. Our results relate to work on illiquid asset markets, including appraisal smoothing, tests of market efficiency, and the valuation of options on real assets. [ABSTRACT FROM AUTHOR]

Summary. In this article we study the effects of transaction costs on asset prices. We assume an overlapping generations economy with two riskless assets. The first asset is liquid while the second asset carries proportional transaction costs. We show that agents buy the liquid asset for short-term investment and the illiquid asset for long-term investment. When transaction costs increase, the price of the liquid asset increases. The price of the illiquid asset decreases if the asset is in small supply, but may increase if the supply is large. These results have implications for the effects of transaction taxes and commission deregulation. [ABSTRACT FROM AUTHOR]

Analysis of 86 Brazilian manufacturing firms operating during a period marked by some degree of financial repression demonstrates that investment spending influences the liquid asset holdings of firms. This self-finance motive is weaker than the transactions motive but, in general, remains statistically significant across a variety of model specifications. Small firms are more likely than large firms to finance investment spending through accumulation of liquid assets. Contrary to the complementarity hypothesis, however, there is some evidence that firms treat liquid assets and capital as substitutes. Specification tests comparing the Shaw hypothesis with the McKinnon hypothesis weakly favour the complementarity model. [ABSTRACT FROM AUTHOR]

The more liquid a firm's assets, the greater their value in a short-notice liquidation. It is generally thought that a firm should find it easier to raise external finance against more liquid assets. This paper focuses on the dark side of liquidity: greater asset liquidity reduces the firm's ability to commit to a specific course of action. As a result, greater asset liquidity can, in some circumstances, reduce the firm's capacity to raise external finance. Firms with "excessively" liquid assets are in the best position to finance illiquid projects. This leads us to a theory of financial intermediation and disintermediation based on the liquidity of assets. [ABSTRACT FROM AUTHOR]

We consider the liquid asset management problem of a firm with a fixed business. Two questions are addressed: How much, if any, of the firm's liquid assets should be paid to the owners as dividends? If the liquid asset level is negative (resulting from a net loss in the previous period), should sufficient funds be raised to pay off the corresponding short-term debts, or should the benefit of limited liability be applied by liquidating the firm (declaring it bankrupt)? These questions are addressed in a multiperiod environment under uncertainty. The owners seek to maximize the present expected value of the after-tax returns from dividends less funds invested over the lifetime of the firm. Since the owners must pay income taxes on dividends they receive but cannot deduct the expenses of paying off short-term debts when needed, they have an incentive to have the firm retain some liquid assets as a hedge against having to raise funds to pay off such short-term debts. The form of the optimal policy in the general case is found to be surprisingly complex. A numerical example is used to illustrate the possible complexities. The main thrust of the paper is the presentation of three sets of conditions that are sufficient to prove that there exists an optimal policy with a certain intuitively pleasing and simple form. [ABSTRACT FROM AUTHOR]

Presents the author's views on the usefulness of the approach for demand for assets and money in particular, from the standpoint of neoclassical demand theory. Information on the Almost Ideal Demand System (AIDS) model, which may be adapted to explain the demand for assets; Illustration of the AIDS model as applied to the demand for liquid assets of the Great Britain personal sector.

The article focuses on illiquidity, consumer durable expenditure, and monetary policy. In the literature on consumer durable expenditure, monetary policy has a major impact either through interest rate or liquid asset effects. The theoretical justification for the inclusion of liquid assets as an important determinant of consumer durable expenditures is not particularly strong, and results with this variable have been mixed. This paper studies the neglected illiquid aspect of the consumer durable asset. It finds that increased consumer liabilities are a major deterrent to consumer durable purchases and increased financial asset holdings a powerful encouragement. The results show that monetary policy has a strong impact on consumer durable expenditure through two additional channels of monetary influence. Monetary policy affects the price of assets in the economy. Past monetary policy will have affected the cost and availability of credit, thus influencing the size of consumers' debt holdings and hence consumer durable expenditure.

The growth of spending on consumer goods in the United Kingdom in recent years has been a severe test of previously well-established consumption functions. This paper assesses the performance of a dominant 'standard' consumption function which relies on income and net liquid assets; it turns out that this has not been able to track the growth in consumer spending. However, developments of this consumption function which find a role for the components of personal sector wealth perform rather well, with satisfactory diagnostic statistics and an estimated equation standard error of around 0.4%.
The purpose of this study is both backward-looking, in the sense of assessing the performance of versions of HUS consumption functions which were previously thought to explain the data rather well, and more forward-looking to see if there are developments which suggest that the situation may not be quite so bad after all. To anticipate the results reported below, I am able to show that relating consumption to disaggregated wealth components does offer an explanation of consumption expenditures on non-durables and services. Indeed, since the HUS framework is by now very familiar it might be useful to summarize my conclusions at this stage. [ABSTRACT FROM AUTHOR]

In this paper we consider whether, from a systems viewpoint, the composition of the UK personal sector's wealth affects its expenditure and asset demands. There has been much recent interest in wealth effects on consumers' expenditure but most studies tend to consider total wealth (e.g. Bennet, 1982) or holdings of liquid assets only (e.g. Hendry and von Ungern-Sternberg, 1981). Moreover, they examine expenditure functions in isolation rather than in the context of joint consumption--portfolio decision-making. In this study we examine the relevance of the composition of wealth within an estimated version of the simultaneous integrated model outlined in Owen (1981). Wealth-composition effects are examined by testing the validity of aggregation restrictions on the components of wealth in each equation using systems-wide likelihood ratio tests.[2]
In Section II the integrated model used as the basis for estimation and testing is outlined. Section III considers the requirements for identification of the general simultaneous model and invariance results when deleting one equation from the system for full information maximum likelihood (FIML) estimation. Section IV contains a discussion of the asset categories examined, other details of empirical estimation and the data used. FIML estimates of the model are derived in Section V and Section VI presents the results of testing wealth-composition effects. Section VII contains a summary and conclusions. Definitions of the variables used and data sources are given in an Appendix. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to provide new evidence beating on this issue. Following the important lead of Chetty, our study begins with a utility function. Specifically, an S-branch utility tree is employed which allows the grouping of various financial assets and money into subsets from which estimates of the ease or substitutability within subsets may be obtained. Moreover, nonlinear demand equations for money and other financial assets are estimated. The S-branch form also allows us to ascertain the preference intensity of individuals for selected liquid assets. Estimated budget share parameters will be obtained in order to determine the optimal portfolio combination of near money holdings. [ABSTRACT FROM AUTHOR]

Aggregate saving functions have been grouped into several models which have similar theoretical underpinnings. They are then tested under criteria pertaining to their predictive accuracy and their economic reasonableness. It is found that saving is predicted much more accurately when it includes net investment in consumer durables (i.e., "use value" saving, [sup D]S) as opposed to when it is defined as only personal saving (S). In predicting [sup D]S, the functions which use current income and lagged consumption perform best. In predicting S, the functions which perform best are those which include liquid assets in addition to current income and lagged consumption. [ABSTRACT FROM AUTHOR]

The article focuses on the relationship of dissaving to income and the usual aggregative time-series studies which need to be supplemented by microeconomic short-run analysis. The higher the income, the larger was the proportion of positive savers and especially the proportion of large positive savers. Additions to liquid asset holdings and savings usually contracted for many years in advance represented during the last two years the most frequent ways of saving, responsible for most of the amounts saved. Many of the variables which show a positive correlation to amounts saved are themselves correlated with income.