Do Higher Wealth Levels Really Guarantee Higher Returns? A Euro Area Test

Do Higher Wealth Levels Really Guarantee Higher Returns? A Euro Area TestEuro area household wealth accumulation is commonly perceived to be impaired by negative return shocks, wealth-reducing policy measures and suboptimal investment behaviour.It is further assumed that poorer households are disproportionately affected, earn lower returns and that wealth inequality is thereby amplified.This article challenges these assumptions by providing the first comprehensive estimates of real asset and equity returns by wealth group for France, Germany, Italy, Spain and the euro area as a whole, using a new Eurosystem data set from 2011 onwards.The results show that, except in Spain, real asset returns rise with net wealth.Real equity returns display a U-shaped pattern in Germany, France and the euro area -where both poorer and very wealthy households achieve higher returns than the middle class -while returns are positively correlated with net wealth in Italy and negatively in Spain.These patterns reflect heterogeneous asset returns and leverage dynamics both within and between countries.