Three Essays on Household Life-cycle Investment Decisions - 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 Three Essays on Household Life-cycle Investment Decisions write by Yu Zhang (Applied economist). This book was released on 2018. Three Essays on Household Life-cycle Investment Decisions available in PDF, EPUB and Kindle.
Three Essays on Household Asset Allocation
Three Essays on Household Asset Allocation - 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 Three Essays on Household Asset Allocation write by Yang Su. This book was released on 2019. Three Essays on Household Asset Allocation available in PDF, EPUB and Kindle. With high-quality household level asset holding data becoming available as well as the exponential increase in computing power, there is a growing literature that studies how households make investment decisions facing various types of uninsurable background risks. In this dissertation, I build theoretical models and conduct empirical studies to investigate different problems on household asset allocation. In chapter 1, I build a life-cycle model of portfolio choice with endogenous labor supply and a fixed cost of labor market participation to incorporate both the extensive and intensive mar- gins of labor supply decisions. I show that the risky asset holdings of young agents (agents younger than 45-year-old) are lower when compared to a model that only incorporates the intensive margin of labor supply. The risky asset holdings of young agents are further reduced and become hump-shaped when two additional features are included to the model: 1) endogenous Social Security accumulation and 2) a small possibility of a zero-income state. These two features increase the uncertainties faced by the agents while the fixed cost of labor market participation reduces the agents's ability to use labor supply to buffer against future income uncertainties. My model therefore reduces the gap between the empirical observations on household risky asset holdings and the predictions made by life-cycle models with endogenous labor supply. In chapter 2, we build a three-period model to study asset allocation ("how much to invest") and location ("which account to use") consequences when an economic agent has internal habit formation utility and has access to both an illiquid but tax-favored retirement account and a taxable personal account. We show that the incentive to maintain high consumption relative to the habit level and the restriction of only having access to the personal account before retirement induces the agent to hold a safer portfolio in her personal account and a riskier portfolio in her retirement account, in accordance with empirical findings on retirement asset allocation. We also show that retirement asset allocation and location decisions are affected by bequest motives and employer match, providing policy implications for retirement plan designers. In chapter 3, I provide updated estimations of the age profiles of stock market participation and risky share in the United States using data from the Panel Study of Income Dynamics (PSID). This chapter is motivated by the recent findings of Fagereng, Gottlieb, and Guiso (2017) on Norwegian data that the age profiles of stock market participation rate and risky share become closer to theoretical predictions when they employ more precise empirical strategies to identify the age, cohort and year effects, control for demographic variables and use a Heckman selection model to control for the endogeneity of stock market participation decision. I apply the same empirical strategies in Fagereng et al. (2017) on the U.S. data. I find that the age profile of stock market participation rate is increasing over the life cycle instead of hump-shaped. The estimated conditional risky share, after controlling for selection, is higher than the risky shares reported in previous papers and it is slightly increasing over the life cycle.
Essays on Saving, Bequests, Altruism, and Life-cycle Planning
Essays on Saving, Bequests, Altruism, and Life-cycle Planning - 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 Essays on Saving, Bequests, Altruism, and Life-cycle Planning write by Laurence J. Kotlikoff. This book was released on 2001-06-22. Essays on Saving, Bequests, Altruism, and Life-cycle Planning available in PDF, EPUB and Kindle. This collection of essays, coauthored with other distinguished economists, offers new perspectives on saving, intergenerational economic ties, retirement planning, and the distribution of wealth. The book links life-cycle microeconomic behavior to important macroeconomic outcomes, including the roughly 50 percent postwar decline in America's rate of saving and its increasing wealth inequality. The book traces these outcomes to the government's five-decade-long policy of transferring, in the form of annuities, ever larger sums from young savers to old spenders. The book presents new theoretical and empirical analyses of altruism that rule out the possibility that private intergenerational transfers have offset those by the government.While rational life-cycle behavior can explain broad economic outcomes, the book also shows that a significant minority of households fail to make coherent life-cycle saving and insurance decisions. These mistakes are compounded by reliance on conventional financial planning tools, which the book compares with Economic Security Planner (ESPlanner), a new life-cycle financial planning software program. The application of ESPlanner to U.S. data indicates that most Americans approaching retirement age are saving at much lower rates than they should be, given potential major cuts in Social Security benefits.
Household Financial Choice
Household Financial Choice - 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 Household Financial Choice write by Michael S. Finke. This book was released on 2011. Household Financial Choice available in PDF, EPUB and Kindle. This dissertation examines household characteristics the impact financial decision making. The first essay explores the role of cognitive ability in numeracy, risk tolerance, credit decisions, wealth and retirement savings and asset allocation and finds that cognitive ability is an important predictor of financial decisions. The second essay develops a new instrument to measure time discounting and models asset accumulation and asset allocation and finds that a factor score of intertemporal behaviors is significantly related to both asset accumulation and asset allocation. The third essay documents the decline in basic financial knowledge among households over 60 using a new financial literacy instrument developed to more accurately capture a household's ability to make effective balance sheet, credit, investment, and insurance choices.
ESSAYS ON PORTFOLIO CHOICE AND HEALTH OVER THE LIFE CYCLE
ESSAYS ON PORTFOLIO CHOICE AND HEALTH OVER THE LIFE CYCLE - 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 ESSAYS ON PORTFOLIO CHOICE AND HEALTH OVER THE LIFE CYCLE write by You Du. This book was released on 2021. ESSAYS ON PORTFOLIO CHOICE AND HEALTH OVER THE LIFE CYCLE available in PDF, EPUB and Kindle. 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.
