Income volatility and portfolio choices
Link to article:
Chang, Yongsung, Jay H. Hong, Marios Karabarbounis, Yicheng Wang, Tao Zhang
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 ESOP
Oppdragsgivers prosjektnr.: 227072
Frisch prosjekt: 1182 - European Strains