Habit Formation and Lifetime Portfolio Selection - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Habit Formation and Lifetime Portfolio Selection write by Yoel Lax. This book was released on 2001. Habit Formation and Lifetime Portfolio Selection available in PDF, EPUB and Kindle. 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 Choice with Internal Habit Formation
Portfolio Choice with Internal Habit Formation - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Portfolio Choice with Internal Habit Formation write by Francisco J. Gomes. This book was released on 2003. Portfolio Choice with Internal Habit Formation available in PDF, EPUB and Kindle.
Handbook of Financial Econometrics
Handbook of Financial Econometrics - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Handbook of Financial Econometrics write by Yacine Ait-Sahalia. This book was released on 2009-10-19. Handbook of Financial Econometrics available in PDF, EPUB and Kindle. This collection of original articles—8 years in the making—shines a bright light on recent advances in financial econometrics. From a survey of mathematical and statistical tools for understanding nonlinear Markov processes to an exploration of the time-series evolution of the risk-return tradeoff for stock market investment, noted scholars Yacine Aït-Sahalia and Lars Peter Hansen benchmark the current state of knowledge while contributors build a framework for its growth. Whether in the presence of statistical uncertainty or the proven advantages and limitations of value at risk models, readers will discover that they can set few constraints on the value of this long-awaited volume. - Presents a broad survey of current research—from local characterizations of the Markov process dynamics to financial market trading activity - Contributors include Nobel Laureate Robert Engle and leading econometricians - Offers a clarity of method and explanation unavailable in other financial econometrics collections
Retirement Portfolios
Retirement Portfolios - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Retirement Portfolios write by Michael J Zwecher. This book was released on 2010-01-21. Retirement Portfolios available in PDF, EPUB and Kindle. A “very practical” guide for finance professionals on creating and managing retirement portfolios (Journal of Pensions, Economics and Finance). Retirement is one of the most important parts of the financial planning process, yet only two percent of financial advisors describe themselves as competent at it. But the demand is only growing as baby boomers move toward this new phase of life. It is imperative that financial advisors be equipped and ready. That's why Michael Zwecher—a leading expert on retirement income—has created Retirement Portfolios, which: Examines how portfolios should be prepped in advance so that the transition from “working” portfolio to retirement portfolio is smooth and seamless Outlines how to create a portfolio that will provide income, continue to generate growth, and protect assets from disaster Details the differences in managing a retirement portfolio versus managing portfolios during asset accumulation years The ability to create appropriate retirement portfolios and manage their risks are skills you must possess to be an effective financial advisor. Retirement Portfolios will help you develop these essential skills and gain a better understanding of the entire process.
Habit Formation and Persistence in Individual Assest Portfolio Holdings
Habit Formation and Persistence in Individual Assest Portfolio Holdings - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Habit Formation and Persistence in Individual Assest Portfolio Holdings write by Sònia Muñoz. This book was released on 2006. Habit Formation and Persistence in Individual Assest Portfolio Holdings available in PDF, EPUB and Kindle. 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.
