Income volatility and portfolio choices
Link to article:
Authors:
Chang, Yongsung, Jay H. Hong, Marios Karabarbounis, Yicheng Wang, Tao Zhang
Year:
2022
Reference:
vol 44, 65-90Summary
Based on administrative data from Statistics Norway, we find economically significant shifts in households’ financial portfolios around individual structural breaks in labor-income volatility. According to our estimates, when income risk doubles, households reduce their risky share of financial assets by 5 percentage points, thus tempering their overall risk exposure. We show that our estimated risky share response is consistent with a standard portfolio choice model augmented with idiosyncratic, time-varying income volatility.
Project:
Oppdragsgiver: NFR via ESOPOppdragsgivers prosjektnr.: 227072
Frisch prosjekt: 1182 - European Strains