The Impact of Major Life Events on Australian Household Financial Decision-Making and Portfolio Rebalancing

26 Pages Posted: 31 Jan 2017

Multiple version iconThere are 2 versions of this paper

Date Written: January 30, 2017

Abstract

We use household-level longitudinal data to gain insights into the asset portfolio rebalancing responses of households experiencing a severe financial shock. The four major life events we consider are serious illness or injury, death of a spouse, being fired or made redundant, and separation from a spouse alongside 11 asset classes. We use Tobit models to assess the impact of the life events on asset class shares and the magnitude and duration of the financial shocks over time. We find that serious illness and injury, loss of employment, and separation cause households to rebalance portfolios.

Keywords: Household finance, Asset portfolios, Portfolio rebalancing, Life events

JEL Classification: C24, D14, G10

Suggested Citation

West, Tracey and Worthington, Andrew C., The Impact of Major Life Events on Australian Household Financial Decision-Making and Portfolio Rebalancing (January 30, 2017). Available at SSRN: https://ssrn.com/abstract=2908595 or http://dx.doi.org/10.2139/ssrn.2908595

Tracey West

Griffith University ( email )

170 Kessels Road
Nathan, Queensland QLD 4111
Australia

Andrew C. Worthington (Contact Author)

Griffith University ( email )

170 Kessels Road
Nathan, Queensland 4111
Australia
+61 (0)7 3735 4273 (Phone)
+61 (0)7 3735 3719 (Fax)

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