Asset Market Participation and Portfolio Choice Over the Life-Cycle

51 Pages Posted: 24 Mar 2016 Last revised: 27 Mar 2018

See all articles by Andreas Fagereng

Andreas Fagereng

BI Norwegian Business School; Statistics Norway

Charles Gottlieb

University of St. Gallen - SEPS: Economics and Political Sciences

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF); Einaudi Institute for Economics and Finance

Multiple version iconThere are 4 versions of this paper

Date Written: June 30, 2016

Abstract

Using error-free data on life-cycle portfolio allocations of a large sample of Norwegian households, we document a double adjustment as households age: a rebalancing of the portfolio composition away from stocks as they approach retirement and stock market exit after retirement. When structurally estimating an extended life-cycle model, the parameter combination that best fits the data is one with a relatively large risk aversion, a small per-period participation cost, and a yearly probability of a large stock market loss in line with the frequency of stock market crashes in Norway.

Keywords: portfolio choice, portfolio rebalancing, asset market participation, life cycle model

JEL Classification: G11, D14, D91

Suggested Citation

Fagereng, Andreas and Gottlieb, Charles and Guiso, Luigi and Guiso, Luigi, Asset Market Participation and Portfolio Choice Over the Life-Cycle (June 30, 2016). Journal of Finance, 72 (2) pp. 705-750, 2017, Available at SSRN: https://ssrn.com/abstract=2753717

Andreas Fagereng (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Statistics Norway ( email )

Postboks 8131 Dep, 0033 Oslo
Oslo, Oslo 0033
Norway
+47 2109 4700 (Phone)

HOME PAGE: http://sites.google.com/site/andreasfagereng/

Charles Gottlieb

University of St. Gallen - SEPS: Economics and Political Sciences ( email )

Rosenbergstrasse 51
St. Gallen, St. Gallen CH-9000
Switzerland

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Sallustiana 62
Rome, 00187
Italy
+39 06 4792 4858 (Phone)
+39 06 4792 4872 (Fax)

HOME PAGE: http://www.eief.it/faculty-visitors/faculty-a-z/luigi-guiso/

Einaudi Institute for Economics and Finance ( email )

Via Sallustiana 62
rome, 00187
Italy

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