Household portfolio allocation and stock market beliefs: Evidence from Japanese households

Abstract We analyze data from the Keio Household Panel Survey (KHPS) to investigate how individuals' beliefs about financial markets influence current and planned asset holdings. Our results reveal statistically and economically significant relations between specific beliefs and both present asset allocations and accumulation. These relations remain robust when we employ an instrumental variable approach with historical beliefs to address potential endogeneity. Furthermore, we examine how current beliefs shape long‐term financial planning, highlighting their importance in influencing future asset allocation decisions. Overall, our findings suggest that correcting misconceptions and shaping financial market beliefs may offer a pathway to improving household financial well‐being.