Lifecycle investment decisions and labor income risk
AbstractThe optimal proportion of financial wealth placed in stocks versus risk-free bonds changes over an investor's life and is very sensitive to the long-run correlation between stock returns and labor income. If this correlation is assumed to be high, then the optimal proportion of stock is hump-shaped and approximately zero for young agents, in contrast to the claims of financial advisers and most academic models.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Federal Reserve Bank of San Francisco in its journal FRBSF Economic Letter.
Volume (Year): (2010)
Issue (Month): jul12 ()
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Baxter, Marianne & Jermann, Urban J, 1997.
"The International Diversification Puzzle Is Worse Than You Think,"
American Economic Review,
American Economic Association, vol. 87(1), pages 170-80, March.
- Marianne Baxter & Urban J. Jermann, 1995. "The International Diversification Puzzle is Worse Than You Think," NBER Working Papers 5019, National Bureau of Economic Research, Inc.
- Baxter, M. & Jermann, U.J., 1993. "The International Diversification Puzzle is Worse than you Think," RCER Working Papers 350, University of Rochester - Center for Economic Research (RCER).
- repec:att:wimass:9722 is not listed on IDEAS
- Luis M. Viceira, 1999.
"Optimal Portfolio Choice for Long-Horizon Investors with Nontradable Labor Income,"
NBER Working Papers
7409, National Bureau of Economic Research, Inc.
- Luis M. Viceira, 2001. "Optimal Portfolio Choice for Long-Horizon Investors with Nontradable Labor Income," Journal of Finance, American Finance Association, vol. 56(2), pages 433-470, 04.
- Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002.
"Consumption Over the Life Cycle,"
Econometric Society, vol. 70(1), pages 47-89, January.
- Gourinchas, Pierre-Olivier & Parker, Jonathan A, 2000. "Consumption Over the Life-Cycle," CEPR Discussion Papers 2345, C.E.P.R. Discussion Papers.
- Pierre-Olivier Gourinchas & Jonathan A. Parker, 1999. "Consumption Over the Life Cycle," NBER Working Papers 7271, National Bureau of Economic Research, Inc.
- Francisco Gomes & Alexander Michaelides, 2005.
"Optimal Life-Cycle Asset Allocation: Understanding the Empirical Evidence,"
Journal of Finance,
American Finance Association, vol. 60(2), pages 869-904, 04.
- Gomes, Francisco J & Michaelides, Alexander, 2005. "Optimal Life-Cycle Asset Allocation: Understanding the Empirical Evidence," CEPR Discussion Papers 4853, C.E.P.R. Discussion Papers.
- Deborah Lucas, 2007. "Valuing & Hedging: Defined Benefit Pension Obligations - The Role of Stocks Revisited," Money Macro and Finance (MMF) Research Group Conference 2006 169, Money Macro and Finance Research Group.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diane Rosenberger).
If references are entirely missing, you can add them using this form.