Essays In Household Savings And Portfolio Choice
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Essays In Household Savings And Portfolio Choice
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Author : Mariela Dal Borgo
language : en
Publisher:
Release Date : 2015
Essays In Household Savings And Portfolio Choice written by Mariela Dal Borgo 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 Household Portfolio Choice
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Author : Tae-Young Pak
language : en
Publisher:
Release Date : 2016
Three Essays On Household Portfolio Choice written by Tae-Young Pak and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
This dissertation considers household portfolio choice at the end of life-cycle. Three essays examine the importance of uncertainty about medical expenditure risk, cognitive aging, and subjective life horizon, and their role in explaining late-life savings decisions and portfolio allocation. Chapter 2 of the dissertation, entitled "Medical expenditure risk and precautionary saving: Evidence from Medicare Part D", tests the presence of precautionary saving motive to cope with medical expenditure risk. By examining Medicare Part D and it's association with household saving, I demonstrate that social insurance programs discourage private saving by reducing health-related uncertainty. Chapter 3 of the dissertation, entitled "Econometric analysis of cognitive abilities and portfolio choice", explores the role of cognitive aging in explaining a portfolio rebalancing towards safer assets at the end of life-cycle. In this essay, I argue that a gradual decrease in risky asset ownership at the end of life-cycle is in part driven by losing cognitive capabilities. I pay particular attention to testing whether such association is observed only on the extensive margin - that is, changes in ownership, or both risky asset ownership and reallocation across the intensive margin are affected. Causality is tested by exploiting exogenous variation in cognitive health, created by the introduction of Medicare Part D in 2006. Chapter 4 of the dissertation, entitled "Subjective life expectancy and portfolio choice: A household bargaining approach", examines collective decision-making when spouses have an incentive to bargain over portfolio allocation. This article starts with two well-known facts: (a) difference in life expectancy between husband and wife; and (b) age disparity in marriage. These two facts imply that females, on average, face 5 or 6 years longer retirement period to finance, and thus have more incentive to hold risky assets to achieve higher expected capital gains in the long-term. A difference in life expectancy then creates an incentive to bargain over how to allocate savings to risky and non-risky assets. The estimation results indeed show that more financial wealth is allocated to risky assets when a spouse with longer life expectancy has the "final say."
Household Savings And Portfolio Choice
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Author : Sean Patrick Klein
language : en
Publisher:
Release Date : 2010
Household Savings And Portfolio Choice written by Sean Patrick Klein and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
This thesis consists of three essays that examine household savings and portfolio choice behavior. Chapter One analyses the effects of employer matching contributions and tax incentives on participation and contribution behavior in employer-sponsored 401(k) savings plans. Employer sponsored retirement savings plans consist of several different incentives designed to increase employee savings, including matching contributions, tax deductibility, and tax free compounding. There is a substantial literature on the effects of match rates on retirement savings, but little on the effects of preferential tax treatment. This chapter provides estimates of the impact of employer matching and tax deductibility on retirement savings using a uniquely suited dataset from a large United States Corporation. I estimate that the effect of a one percentage point change in the match rate corresponds to a 0.06 percentage point increase in savings plan participation rates, while a similar one percentage point increase in marginal tax rates increases participation by 1.35 percentage points. Changes in the match rate have an insignificant effect on contribution rates (conditional on participation), though a one percentage point change in marginal tax rates tends to increase contribution rates by 0.16 percentage points. The effects of the match rate and marginal tax rate are transformed into changes in the annualized rate of return of the savings plan and this disparity remains.
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 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.
Three Essays On Household Saving And Wealth
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Author : Kyeongwon Yoo
language : en
Publisher:
Release Date : 2003
Three Essays On Household Saving And Wealth written by Kyeongwon Yoo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with Households categories.
Essays In The Economics Of Retirement Income Security And Household Decision Making
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Author : Saku P. Aura
language : en
Publisher:
Release Date : 2001
Essays In The Economics Of Retirement Income Security And Household Decision Making written by Saku P. Aura and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with categories.
The first essay of this thesis studies within-family decision making regarding investment in income protection for surviving spouses using a simple and tractable Nash-bargaining model. A change in US pension law (the Retirement Equity Act of 1984) is used as an instrument to derive predictions from the bargaining model and to contrast these with the predictions of the classical single-utility-function model of the household. In the empirical part of the essay, the predictions of the classical model are rejected in favor of the predictions of the Nash-bargaining model. Second essay studies married couple's dynamic investment and consumption choices under the assumption that the couple cannot commit across time to not to renegotiate their decisions. The inefficiencies that can arise are characterized. Efficiency properties of different divorce asset division regimes are examined. The effect of inability to commit across time on the savings level is examined under a tractable special case of the model. Third essay is coauthored with Professor Peter Diamond and Professor John Geanakoplos. In this essay we extend Arrow's analysis of portfolio choice in a one-period model to savings and portfolio choice in a two-period model.
Household Saving Portfolio Choice And The Rate Of Interest
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Author : Anne-Marie Pålsson
language : en
Publisher:
Release Date : 1989
Household Saving Portfolio Choice And The Rate Of Interest written by Anne-Marie Pålsson and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1989 with categories.
Essays In Macroeconomics And Household Finance
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Author : Eirik E. Brandsaas
language : en
Publisher:
Release Date : 2021
Essays In Macroeconomics And Household Finance written by Eirik E. Brandsaas 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 studies how family resources interact with financial constraints in households' savings and investment decisions. The first chapter quantifies the contribution of parental transfers to the homeownership rate of the young. Parents and children interact without commitment in an incomplete markets life-cycle overlapping generations model with housing. Transfers increase homeownership by relaxing borrowing constraints and reducing risks associated with homeownership. Moreover, children with wealthy parents may overinvest in housing to extract larger future transfers from their parents. I find that transfers increase the homeownership rate among households aged 25-44 by 15 p.p. (31%). Finally, I show that policies that reduce sales costs are more effective than relaxing financial constraints or purchase costs at decreasing the role of parental wealth in children's housing outcomes. The second chapter studies whether homeownership can explain the low stock market participation rate in the United States. I first show that the low participation rate is driven by high exit rates among participants and that exit is frequently tied to house purchases. I then extend a workhorse life-cycle model of portfolio choice to include housing. After estimating the models, with and without housing, I find that housing improves model fit. In particular, housing reduces the unexplained participation rate between the model and the data by 71%. Moreover, housing improves model fit by increasing the exit rate among young and middle-aged households and decreasing homeowners' liquid wealth. The third chapter studies the effect of parental wealth on a household's risk-taking in asset and labor markets. Together with my co-authors, we show that households with wealthier parents take more risk in their portfolio and labor market choices. Since risk in one dimension can be offset by choices in other assets, we develop a combined risk measure robust to this concern. Our results have implications on the persistence of wealth across generations and wealth inequality. Our results provide one explanation for the finding that returns to wealth are increasing in wealth since wealth is correlated over generations.
Three Essays In Household Finance
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Author : Andreas Fagereng
language : en
Publisher:
Release Date : 2012
Three Essays In Household Finance written by Andreas Fagereng and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with Families categories.
This thesis contains three chapters relating to the field of household finance. In the first chapter household life cycle investment behaviour is investigated using a panel of Norwegian administrative data and tax records. Dealing with selection and identification issues, the data suggests a double adjustment as people age: a rebalancing of the portfolio away from stocks as households approach retirement, and a peak in stock market participation around the time when they reach retirement. A theoretical model predicting these life cycle patterns of investment behavior is then provided. This is achieved by extending existing models with a per period participation cost in risky asset markets and a small perceived probability of being cheated. In the second chapter the relation between household financial asset holdings and unemployment is investigated. Consistent with a simple theoretical model, the data shows increased savings and a shift towards safer assets in the years leading up to unemployment, and depletion of savings during unemployment. This suggests that at least some households can foresee and prepare for upcoming unemployment, which indicates that private savings can complement publicly provided unemployment insurance. The final chapter identifies the causal effect of lump-sum severance payments on non-employment duration in Norway by exploiting a discontinuity in eligibility at age 50. A severance payment worth 1.2 months' earnings lowers the fraction re-employed after one year by six percentage points. This effect is decreasing in wealth, which supports the view that the effect of severance pay should be interpreted as evidence of liquidity constraints. Finding liquidity constraints in Norway, despite its equitable wealth distribution and generous welfare state, suggests they are likely to exist also in other countries.