Asset Accumulation, Information, and the Life Cycle

40 Pages Posted: 28 Dec 2006 Last revised: 17 Jul 2022

See all articles by Mervyn King

Mervyn King

Bank of England; National Bureau of Economic Research (NBER)

Jonathan I. Leape

London School of Economics & Political Science (LSE) - Department of Economics

Date Written: September 1987

Abstract

Empirical tests of the life cycle model have focused on its implications for the level of a household's total net worth and paid little attention to changes in portfolio composition over the life cycle. In this paper, we examine a new survey of the asset holdings of 6,010 U.S households and show that there is a pronounced life-cycle pattern to both the number and value of assets held by U.S. households. Direct survey evidence suggests that incomplete information is a significant determinant of household portfolio composition. We test the hypothesis that information about investment opportunities arrives stochastically over time, estimating a Poisson model for the arrival of new information.

Suggested Citation

King, Mervyn A. and Leape, Jonathan I., Asset Accumulation, Information, and the Life Cycle (September 1987). NBER Working Paper No. w2392, Available at SSRN: https://ssrn.com/abstract=349207

Mervyn A. King (Contact Author)

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Jonathan I. Leape

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