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Stock market participation, portfolio choice and pensions over the life-cycle

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  • Ball, S.

Abstract

In this paper we present a calibrated life-cycle model which is able to simultaneously match asset allocations and stock market participation profiles over the life-cycle. The inclusion of per period fixed costs and a public pension scheme eradicates the need to assume heterogeneity in preferences, or implausible parameter values, in order to explain observed patterns. We find a per period fixed cost of less than two percent of the permanent component of annual labour income can explain the limited stock market participation. More generous public pensions are seen to crowd out private savings and significantly reduce the estimates of these fixed costs. This is the first time that concurrent matching of participation and shares has been achieved within the standard preference framework.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0707.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0707.

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Length: 29
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:cam:camdae:0707

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Web page: http://www.econ.cam.ac.uk/index.htm

Related research

Keywords: precautionary saving; portfolio choice; stock market participation and uninsurable labour income risk;

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Cited by:
  1. Roine Vestman, 2013. "Limited Stock Market Participation Among Renters and Home Owners," 2013 Meeting Papers 549, Society for Economic Dynamics.

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