1 The Dynamics of Individual Financial Portfolio Decisions Laura Marzorati 1 , Guglielmo Weber 2 April 2008 The paper investigates portfolio ownership dynamics for the period 2003-06 on a panel of Italian banked individuals. We distinguish between bonds and equity and then between those assets held directly by the customer and those owned through managed instruments: i.e. mutual funds, unit linked insurance policies or segregate accounts. We find that, after controlling for unobserved heterogeneity, the probability of holding risky financial investments strongly depends on past ownership of the same kind of asset. We also evidence a positive and strong cross-effect among complementary assets: ownership of equity (bond) in previous year increases the probability of holding bonds (equities) today, and similarly for managed and unmanaged assets. We then investigate the determinants of asset portfolio share, once the participation decision is taken. In the second part of the paper, we concentrate on equity investments and try to explain individual active portfolio decisions, which may be induced both by saving/ dissaving motivations as well as by trading activity. We find that current investment decisions are influenced by asset performance as well as by past decisions, while total change in portfolio wealth do not display any significant effect. 1 Pioneer Global Asset Management Research Unit 2 University of Padua, CEPR, IFS