The impact of digitalization on household asset allocation: evidence from the survey of Bank of Italy.

The portfolio asset allocation represents one of main fields of Household Finance that researchers have been studying over the course of several years. Asset allocation is simply the distribution of financial resources among various categories, encompassing both financial assets and tangible assets, including real estate holdings. There are a lot of literature regarding the asset allocation that households should employ through their life, how adjust them depending on the macroeconomic scenarios which they encounter at different stages of life, which is the best in terms of returns and low risk, along with a multitude of other factors. Theoretical models don’t always reflect the empirical results. For instance, the classical Merton model of consumption and portfolio choice (1969) describe the optimal percentage of risky shares in a portfolio related to the expected risk premium, volatility of the assets and the degree of relative risk aversion. An inference drawn of the Merton model is that all investors, irrespectively of their financial wealth and risk, should invest in the market portfolio, i.e., the portfolio that replicate the stock markets with stocks weights proportional to the capitalization of the underlying companies. These implications are not accurate as shown by Guiso and Sodini (2013), regarding both the participation in the stock market and the share of risky assets in the portfolio. These distinctions highlighted in literature have become renowned under the name of participation puzzle, see chapter 2 for an in-depth analysis. An outstanding contribution over the past two decades to the field of portfolio asset allocation has emerged due to the diffusion of online banking services. With the advent of online banking across various financial institutions, investors could choose and modify their asset allocation without the need of any professional financial advice. Notably, the diffusion of internet access, has further facilitated cost-free and convenient access to economic and financial news. Furthermore, online brokerage services have become popular, particularly during the COVID-19 pandemic in 2020-2021, offering zero-commission account openings and minimal transactions fees, especially for basic financial products such as ETFs. They are funds that passively replicate the performance of an index comprising securities grouped by regions, theme, or sectors. As they continuously track an index without a fund manager periodically changing positions in the portfolio by selling or buying securities, they exhibit a very low TER, typically ranging from 0.10% to 0.70%, with thematic ETFs being the most expensive.