Portfolio Choice with Investor Entry and Exit

77 Pages Posted: 24 May 2017 Last revised: 5 Dec 2018

See all articles by Yosef Bonaparte

Yosef Bonaparte

University of Colorado at Denver - Department of Finance

George M. Korniotis

University of Miami; Miami Business School; University of Miami - Behavioral Decision Making Cluster

Alok Kumar

University of Miami - School of Business Administration

Date Written: December 4, 2018

Abstract

We find that about 25% of stockholders enter/exit non-retirement investment accounts biennially. To examine this participation turnover, we estimate a canonical portfolio choice model. The estimation reveals that income risk and time costs to investing, estimated at 3.7% of income, affect the turnover in stock ownership. Further, the estimates of the coefficient of relative risk aversion and the discount factor are 3.176 and 0.963, respectively. Finally, the model implies that consumption CAPMs can perform better when focusing on investors who rarely exit the market because their consumption growth is the most volatile and the most correlated with market returns

Keywords: Consumption risk, limited stock market participation, trading costs, income risk, PSID, SCF

JEL Classification: D14, G11, G12

Suggested Citation

Bonaparte, Yosef and Korniotis, George M. and Kumar, Alok, Portfolio Choice with Investor Entry and Exit (December 4, 2018). Available at SSRN: https://ssrn.com/abstract=2972173 or http://dx.doi.org/10.2139/ssrn.2972173

Yosef Bonaparte

University of Colorado at Denver - Department of Finance ( email )

United States

George M. Korniotis (Contact Author)

University of Miami ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States
305-284-5728 (Phone)

Miami Business School ( email )

University of Miami - Behavioral Decision Making Cluster ( email )

5250 University Drive
Coral Gables, FL 33124
United States

Alok Kumar

University of Miami - School of Business Administration ( email )

514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://moya.bus.miami.edu/~akumar

Register to save articles to
your library

Register

Paper statistics

Downloads
125
rank
221,125
Abstract Views
744
PlumX Metrics