Judging Category
Observational Research
Student Rank
Graduate
College
Business
Faculty Sponsor
Matthew Hill MDHill@astate.edu
Description
We use data from the Survey of Consumer Finances (SCF) to examine whether cross-sectional variation in household liquidity is explained by the precautionary motive. Household liquidity is measured using days’ liquidity held (DLH), defined as the ratio of liquid assets to daily expenditures. Descriptive evidence reveals substantial cross-sectional and time-series variation in household liquidity over the 2004-2022 sample period. Our multivariate results provide mixed support for the precautionary motive for household liquidity. Consistent with the investment dimension of the precautionary motive, household liquidity increases with expected future investment opportunities. However, contrary to the precautionary motive, household liquidity varies inversely with both 1) the likelihood of funding shortfalls and 2) financial constraints. These findings stand in contrast to the corporate liquidity literature, which provides robust empirical support for the precautionary motive as a determinant of liquidity.
Disciplines
Business
License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Recommended Citation
Murray, Austin D., "An Exploratory Analysis of Household Liquidity" (2026). Create@State. 35.
https://arch.astate.edu/evn-createstate/2026/posters/35
Included in
An Exploratory Analysis of Household Liquidity
We use data from the Survey of Consumer Finances (SCF) to examine whether cross-sectional variation in household liquidity is explained by the precautionary motive. Household liquidity is measured using days’ liquidity held (DLH), defined as the ratio of liquid assets to daily expenditures. Descriptive evidence reveals substantial cross-sectional and time-series variation in household liquidity over the 2004-2022 sample period. Our multivariate results provide mixed support for the precautionary motive for household liquidity. Consistent with the investment dimension of the precautionary motive, household liquidity increases with expected future investment opportunities. However, contrary to the precautionary motive, household liquidity varies inversely with both 1) the likelihood of funding shortfalls and 2) financial constraints. These findings stand in contrast to the corporate liquidity literature, which provides robust empirical support for the precautionary motive as a determinant of liquidity.
