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Portfolio choice over the life-cycle when the stock and labor markets are cointegrated

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  • Luca Benzoni
  • Pierre Collin-Dufresne
  • Robert S. Goldstein
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    Abstract

    We study portfolio choice when labor income and dividends are cointegrated. Economically plausible calibrations suggest young investors should take substantial short positions in the stock market. Because of cointegration the young agent's human capital effectively becomes.

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    Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-07-11.

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    Date of creation: 2007
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    Handle: RePEc:fip:fedhwp:wp-07-11

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    Keywords: Portfolio management ; Stock market ; Labor market;

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