Essays In Consumption And Portfolio Choice

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Essays In Consumption And Portfolio Choice

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Author : Jorge Federico Rodriguez
language : en
Publisher:
Release Date : 2003

Essays In Consumption And Portfolio Choice written by Jorge Federico Rodriguez and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.

(Cont.) I solve analytically the consumption and portfolio choice problem for an investor learning about the current value of time-varying expected returns. When prices are the only observables, the investor optimally estimates the current expected returns using the realized returns. Because of this, the market is observationally complete for an imperfectly informed investor. The observational completeness of the market allows me to find analytical, closed-form solutions to the investor's consumption and portfolio choice problem. I show how learning affects both the covariance and the consumption smoothing component of the hedging portfolio. Applying the model to monthly return data, I show a significant reduction in hedging demands due to imperfect information. In contrast to portfolio choice assuming expected returns are observed, in some cases the reduction implies the agent will optimally hold a negative hedging portfolio. I solve in closed-form for the model implied R2 for the return forecast regression, in other words the predictable fraction of return variance, and discuss the relationship between the reduction in hedging demands and the reduction in the model implied R2 for the return forecast regression. Little work has been done in regards to the role of labor income when investment opportunities are stochastic. Chapter 3 considers the consumption and portfolio choice problem of an investor when interest rates are time-varying and labor income growth might be sensitive to changes in interest rates. We obtain closed-form solutions to the consumption and portfolio choice for an investor with both inelastic and elastic labor supply ...

Essays On Portfolio Choice And Health Over The Life Cycle

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Author : You Du
language : en
Publisher:
Release Date : 2021

Essays On Portfolio Choice And Health Over The Life Cycle written by You Du and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.

This dissertation examines the effect of health and its associated variables on households' consumption and portfolio choices over life cycle. The first two essays constitute my job market paper, which explains why the risky portfolio share rises in wealth from two health mechanisms: endogenous health investment and medical expenditure risk. The third chapter explores the effect of health and health risk on households' optimal consumption and portfolio decisions over life cycle. Chapter 1 titled ``PORTFOLIO CHOICE AND HEALTH ACROSS WEALTH: EMPIRICAL EVIDENCE" illustrates the empirical relationship between the portfolio puzzle and the heterogeneity of health variables across wealth. Classic financial theory suggests that under the assumption of no borrowing constraints and no mean-reverting stock returns, households should hold a constant risky portfolio in spite of their wealth, ages and life horizons (Samuelson (1969) and Merton (1969, 1971)). Yet data from the Survey of Consumers Finances (SCF) show that the risky portfolio share of financial assets increases in wealth. In the literature, this is called the ``portfolio puzzle". Meanwhile, various sources of data indicate that, compared with the non-wealthy households, the wealthy people have better health, longer life horizon, higher out of pocket medical spending with lower uncertainty, and more health care time. All these facts suggest a novel correlation between the portfolio puzzle and the heterogeneity of health variables across wealth and provide a robust empirical foundation to explain the portfolio puzzle from a health perspective. In Chapter 2 titled ``A LIFE CYCLE MODEL OF PORTFOLIO CHOICE AND HEALTH", a life cycle model with endogenous health investment and medical expenditure risk is proposed to capture the key empirical features in the first chapter. This calibrated model remarkably matches the U.S. data. I find that endogenous health investment is essential to explain the portfolio puzzle: if health is exogenous without investment, the model can only could deliver 7.2% of the risky share gap across wealth. Medical expenditure risk is less important and has a larger effect on the non-wealthy group. If I abstract from medical expenditure risk, the risky shares increase for both groups: 24% for the low wealth group and 5% for the wealthy group. This life cycle model provides new insights into how health affects households' financial behavior. Chapter 3 titled ``OPTIMAL CONSUMPTION AND PORTFOLIO CHOICE WITH HEALTH RISK" investigates the effect of health and health risk on households' optimal consumption and portfolio allocations over the life cycle. The simulation results show that consumption, savings in bonds, and savings in stocks all increase with health. The risky portfolio share, which is the ratio of savings in stocks to the total financial assets, demonstrates the same tendency for both health states over the life cycle: at the very young age, the risky portfolio share is relatively high. Starting from the middle age, this share falls significantly and keeps steady until the end of life. For most of the lifetime, the risky portfolio share is positively related with health. These results emphasize the importance of health and its associated risk in consumption and portfolio decisions.

Essays On Intertemporal Consumption And Portfolio Choice

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Author :
language : en
Publisher:
Release Date : 2015

Essays On Intertemporal Consumption And Portfolio Choice written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.

Three Essays On Consumption And Portfolio Choice In The Presence Of Market Frictions

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Author : Hyeng Keun Koo
language : en
Publisher:
Release Date : 1992

Three Essays On Consumption And Portfolio Choice In The Presence Of Market Frictions written by Hyeng Keun Koo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1992 with categories.

Essays In Optimal Consumption And Portfolio Choice

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Author : Jialun Li
language : en
Publisher:
Release Date : 2012

Essays In Optimal Consumption And Portfolio Choice written by Jialun Li and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.

Essays On Consumption Insurance And Portfolio Choice Over The Life Cycle

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Author : Lorenz S. Schendel
language : en
Publisher:
Release Date : 2014

Essays On Consumption Insurance And Portfolio Choice Over The Life Cycle written by Lorenz S. Schendel and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.

Essays On Consumption Portfolio Choice With Habits

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Author : Sebastian Wagner
language : en
Publisher:
Release Date : 2017

Essays On Consumption Portfolio Choice With Habits written by Sebastian Wagner and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.

Essays On Expectations Based Reference Dependent Consumption And Portfolio Choice

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Author : Michaela Friederike Annabelle Pagel
language : en
Publisher:
Release Date : 2014

Essays On Expectations Based Reference Dependent Consumption And Portfolio Choice written by Michaela Friederike Annabelle Pagel and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.

Essays On Uncertainty Consumption Portfolio Choice And Labor Search

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Author : 樊华
language : en
Publisher:
Release Date : 2023

Essays On Uncertainty Consumption Portfolio Choice And Labor Search written by 樊华 and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with Consumption (Economics) categories.

Essays In Empirical Asset Pricing And Consumption Portfolio Choice

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Author : Farina Weiss
language : en
Publisher:
Release Date : 2017

Essays In Empirical Asset Pricing And Consumption Portfolio Choice written by Farina Weiss and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.