Habit Formation And Persistence In Individual Assest Portfolio Holdings
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Habit Formation And Persistence In Individual Asset Portfolio Holdings
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Author : Sònia Muñoz
language : en
Publisher:
Release Date : 2006
Habit Formation And Persistence In Individual Asset Portfolio Holdings written by Sònia Muñoz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Asset allocation categories.
This paper uses six waves of the Bank of Italy Survey of Households Income and Wealth to explore the dynamics of asset portfolio ownership. The household asset portfolio decision is a choice among discrete alternatives, and I model the problem in a multinomial framework. I focus on a particularly important feature of household portfolio behavior: the infrequency of portfolio allocation changes. I find evidence of strong unobserved heterogeneity through time-varying error components, which I interpret as taste persistence in both the risky and safe asset participation decisions. I estimate the model using the method of maximum smoothly simulated likelihood.
Habit Formation And Persistence In Individual Assest Portfolio Holdings
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Author : Sònia Muñoz
language : en
Publisher:
Release Date : 2006
Habit Formation And Persistence In Individual Assest Portfolio Holdings written by Sònia Muñoz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Asset allocation categories.
This paper uses six waves of the Bank of Italy Survey of Households Income and Wealth to explore the dynamics of asset portfolio ownership. The household asset portfolio decision is a choice among discrete alternatives, and I model the problem in a multinomial framework. I focus on a particularly important feature of household portfolio behavior: the infrequency of portfolio allocation changes. I find evidence of strong unobserved heterogeneity through time-varying error components, which I interpret as taste persistence in both the risky and safe asset participation decisions. I estimate the model using the method of maximum smoothly simulated likelihood.
Imf Working Papers
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Author : Sònia Muñoz
language : en
Publisher:
Release Date : 2006
Imf Working Papers written by Sònia Muñoz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Electronic books categories.
Habit Formation And Lifetime Portfolio Selection
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Author : Yoel Lax
language : en
Publisher:
Release Date : 2001
Habit Formation And Lifetime Portfolio Selection written by Yoel Lax 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.
A life cycle model in which an investor (a) faces i.i.d. asset returns, (b) receives no non-asset income, and (c) has an iso-elastic period utility function, predicts that the investor will allocate a constant fraction of his wealth to risky securities over his lifetime. This result is at odds with both economic intuition and the empirical evidence on asset allocation of individuals. In this work we investigate the effect that habit formation has on life cycle portfolio allocation. This amounts to relaxing assumption (c) by making period utility dependent on past consumption. We derive the optimal consumption and investment policies for a finitely-lived investor in discrete time and find that habit formation can explain increasingly conservative as well as hump-shaped investment patterns over the life cycle, both of which have been documented empirically. The crucial element determining which pattern obtains is the initial habit of a young investor. Furthermore we find that habit formation induces much stronger life cycle effects than those obtained by relaxing either assumptions (a) or (b): Return predictability is of negligible importance in a habit formation model, and labor income alone cannot generate hump-shaped investment patterns. Next we show that our basic results are robust to whether habit formation is introduced into the utility function as a difference or ratio, and to whether the habit stock consists of only one lag or a distributed lag of consumption. In contrast, the endogeneity of habit is crucial to our results--a model with a constant subsistence level, which is nested in our more general model, cannot produce the same life cycle investment patterns. Finally, we show that a continuous-time version of our habit model yields qualitatively different results.
Portfolio And Consumption Choice With Stochastic Investment Opportunities And Habit Formation In Preferences
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Author : Claus Munk
language : en
Publisher:
Release Date : 2002
Portfolio And Consumption Choice With Stochastic Investment Opportunities And Habit Formation In Preferences written by Claus Munk and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with categories.
We study the dynamic consumption and portfolio choice of an investor who has habit formation in preferences and access to a complete financial market. For general, possibly non-Markov, dynamics of market prices, we provide an exact characterization of the optimal behavior in terms of two relatively simple and intuitively interpretable stochastic processes. We study in more detail the optimal strategies in two concrete examples of time-varying investment opportunities. Firstly, we derive a closed-form solution of the optimal consumption and portfolio choice with mean-reverting stock returns. Secondly, with Cox-Ingersoll-Ross interest rate dynamics we can express the optimal strategies in terms of the solution to a partial differential equation, which has an explicit solution for time-additive preferences, but not with habit formation. Our numerical examples show that, while hedging demands for various assets are affected differently by habit persistence, the main effect on relative asset allocations stems from the fact that some assets (bonds and cash) are better investment objects than others (stocks) when it comes to ensuring that future consumption will not fall below the habit level. The implications of habit persistence in models with labor income are also addressed.
Financialization And Government Borrowing Capacity In Emerging Markets
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Author : I. Hardie
language : en
Publisher: Springer
Release Date : 2012-03-05
Financialization And Government Borrowing Capacity In Emerging Markets written by I. Hardie and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-03-05 with Political Science categories.
Hardie investigates the link between the financialization – defined as the ability to trade risk – and the capacity of emerging market governments to borrow from private markets. He considers the government bond markets in Brazil, Lebanon and Turkey and includes interviews with 126 financial market actors.
Strategic Asset Allocation
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Author : John Y. Campbell
language : en
Publisher: OUP Oxford
Release Date : 2002-01-03
Strategic Asset Allocation written by John Y. Campbell and has been published by OUP Oxford this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002-01-03 with Business & Economics categories.
Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Imf Research Bulletin
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Author :
language : en
Publisher:
Release Date : 2004
Imf Research Bulletin written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with International finance categories.
Artha Suchi
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Author :
language : en
Publisher:
Release Date : 2006
Artha Suchi written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with India categories.
Factor Investing And Asset Allocation A Business Cycle Perspective
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Author : Vasant Naik
language : en
Publisher: CFA Institute Research Foundation
Release Date : 2016-12-30
Factor Investing And Asset Allocation A Business Cycle Perspective written by Vasant Naik and has been published by CFA Institute Research Foundation this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-12-30 with Business & Economics categories.