All their eggs in one basket: Portfolio diversification of US households

This paper uses data from the Survey of Consumer Finances to assess how well mean-variance efficiency describes the portfolio diversification of US households. It does not seem to work well. The median stockholder owns a single publicly traded stock, often in the company where he works. Looking at a sample of high income households who accounted for one third of all publicly traded stock, the median holding is only ten stocks. Indirect stock ownership through mutual funds, defined contribution pension plans, IRA's and trust funds is shown to have little power in explaining this poor diversification.