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Income Risk and Portfolio Choice: An Empirical Study

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Author Info
XIAOHONG ANGERER
POK-SANG LAM
Abstract

This paper investigates the relationship between portfolio choice and labor income risk in the National Longitudinal Survey of Youth 1979 Cohort. Permanent income risk (variability of shocks to income that have permanent effect) significantly reduces the share of risky assets in the household's portfolio, while transitory income risk (variability of shocks with no lasting effect) does not. This result provides strong evidence that households' portfolio choices respond to labor income risks in a manner consistent with economic theory. Copyright (c) 2009 the American Finance Association.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6261.2009.01456.x
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Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 64 (2009)
Issue (Month): 2 (04)
Pages: 1037-1055
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Handle: RePEc:bla:jfinan:v:64:y:2009:i:2:p:1037-1055

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This page was last updated on 2009-12-8.

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