Longevity Risk, Subjective Survival Expectations, and Individual Saving Behavior
Maastricht University - School of Business and Economics - Department of Finance; Netspar
University of New South Wales - ARC Centre of Excellence in Population Ageing Research and School of Risk and Actuarial Studies
November 22, 2012
We provide evidence of individuals’ awareness of longevity risk (the uncertainty about future survival probabilities) based on subjective survival expectations elicited in the Survey of Health, Ageing and Retirement in Europe (SHARE) and matching data on longevity risk from the Human Mortality Database. We find a positive relationship between the forecast dispersion in subjective survival estimates and longevity risk which indicates that individuals are to some extent aware of longevity risk. Our analysis of savings behavior shows that the dispersion in survival estimates is primarily explained by individuals disagreeing on the survival probability and not by their true awareness of the underlying uncertainty. Individuals do not save more on average when faced with longevity risk although theory suggests they should.
Number of Pages in PDF File: 42
Keywords: longevity risk, subjective survival expectations, forecast dispersion, saving behavior
JEL Classification: D14, D84, D91, H31, J11working papers series
Date posted: July 30, 2010 ; Last revised: November 26, 2012
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