Household Finance: Education, Permanent Income and Portfolio Choice
AbstractThis paper studies household financial choices: why are these decisions dependent on the education level of the household? A life cycle model is constructed to understand a rich set of facts about decisions of households with different levels of education attainment regarding stock market participation, the stock share in wealth, the stock adjustment rate and wealth-income ratio. Model parameters, including preferences, the cost of stock market participation and portfolio adjustment costs, are estimated to match the financial decisions of different education groups. Based on the estimated model, education matters through two channels: the mean of income and the discount factor.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19455.
Date of creation: Sep 2013
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Find related papers by JEL classification:
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-26 (All new papers)
- NEP-DGE-2013-09-26 (Dynamic General Equilibrium)
- NEP-EDU-2013-09-26 (Education)
- NEP-MAC-2013-09-26 (Macroeconomics)
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