Portfolio Crowding-Out, Empirically Estimated
Quarterly Journal of Economics
1985
This paper tests hypotheses regarding the parameters in investors' asset-demand functions. The hypothesis that federal bonds are closer substitutes for equity than for money implies “portfolio crowding out” by federal borrowing. Regression studies of asset-demand functions have needed to impose prior beliefs to obtain precise and plausible estimates for the parameters. This paper uses a MLE technique that dominates regression in that it makes full use of the constraint that the parameters are not determined arbitrarily but rather are determined by mean-variance optimization on the part of the investor. The striking conclusion is that portfolio effects are close to zero.
- DOI
- 10.1093/qje/100.supplement.1041
- Volume
- 100 (Supplement)
- Pages
- 1041-1065
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref