A systems approach is applied to UK personal sector holdings of unit trusts, UK company securities, public‐sector long‐term debt and overseas securities. In the long run, asset holdings are determined primarily by hedging considerations but in the short run there is evidence of speculative activity. Asset shares are influenced by relative yields (including capital gains), inflation, and real expenditure. A two‐step estimation procedure is used: a set of cointegration vectors are estimated for asset shares and dynamics are represented by a systems error feedback model. The four equation system is broadly consonant with the data and coefficient estimates are intuitively acceptable.
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