Family Portfolio Choice over the Life Cycle

58 Pages Posted: 18 Nov 2021 Last revised: 23 Mar 2022

See all articles by Joachim Inkmann

Joachim Inkmann

University of Melbourne - Department of Finance

Alexander Michaelides

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Yuxin Zhang

Renmin University of China; Renmin University of China

Date Written: March 22, 2022

Abstract

Intra-household heterogeneity can quantitatively affect the predictions of life-cycle portfolio choice models. Empirically, double-income households, single-income households and singles have different exposures to background risks and differ in covariates affecting financial decisions, reacting differently to varying correlates of stock market participation and life-cycle asset allocation. Counterfactuals using a quantitative model emphasize the aggregation bias arising from treating double-income households as one unit. Intra-household heterogeneity in preference parameters like risk aversion and the presence (absence) of a second wage can alter substantially optimal stock market exposure with important implications for normative financial advice.

Keywords: Family Economics, Portfolio Choice over the Life Cycle, Background Risks, Intra-Household Heterogeneity.

JEL Classification: D14, D15, G11, G51

Suggested Citation

Inkmann, Joachim and Michaelides, Alexander and Zhang, Yuxin and Zhang, Yuxin, Family Portfolio Choice over the Life Cycle (March 22, 2022). Available at SSRN: https://ssrn.com/abstract=3965481 or http://dx.doi.org/10.2139/ssrn.3965481

Joachim Inkmann

University of Melbourne - Department of Finance ( email )

Level 12, 198 Berkeley Street
University of Melbourne, Victoria 3010
Australia
0061 3 9035 8177 (Phone)

HOME PAGE: http://orcid.org/0000-0002-5526-7648

Alexander Michaelides (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Yuxin Zhang

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, Beijing 100872
China

Renmin University of China ( email )

57 Zhong Guanchun Road
Haidian District
Beijing, Beijing 100872
China

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