Subjective Life Horizon and Portfolio Choice

34 Pages Posted: 12 Jan 2013 Last revised: 16 Jan 2016

See all articles by Christophe Spaenjers

Christophe Spaenjers

HEC Paris - Finance Department

Sven Michael Spira

HEC Paris - Finance Department

Date Written: April 8, 2015

Abstract

Using data from a U.S. household survey, we examine the empirical relation between subjective life horizon (i.e., the self-reported expectation of remaining life span) and portfolio choice. We find that equity portfolio shares are higher for investors with longer horizons, controlling for gender-specific age effects, socio-economic characteristics, health, and optimism. Our result is robust to accounting for the endogeneity of equity market participation or instrumenting subjective life horizon with parental survival. Finally, we show that the effect of a shortening horizon on portfolio allocation is stronger for households without bequest motives.

Keywords: portfolio choice, investment horizon, subjective expectations, life expectancy, bequests

JEL Classification: D12, D14, D80, D91, G11

Suggested Citation

Spaenjers, Christophe and Spira, Sven Michael, Subjective Life Horizon and Portfolio Choice (April 8, 2015). Journal of Economic Behavior and Organization, Vol. 116, 2015, Available at SSRN: https://ssrn.com/abstract=2199513 or http://dx.doi.org/10.2139/ssrn.2199513

Christophe Spaenjers (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Sven Michael Spira

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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