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Which economic uncertainty measure matters for households' portfolio decision?

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  • Kiryoung Lee
  • Yoontae Jeon
  • Insik Kim

Abstract

In this study, we address two research questions: Do recently developed economic uncertainty measures matter for household portfolio choices? If so, which measure is most important? Using household data, we compare 16 uncertainty measures in our unified framework. We find that the economic policy uncertainty (EPU) measure is the most important for household portfolios. We further find that married, more educated, older, and wealthier households are more sensitive to EPU. Finally, our findings highlight the importance of labor income in the sensitivity of households' portfolio decisions to uncertainty.

Suggested Citation

  • Kiryoung Lee & Yoontae Jeon & Insik Kim, 2021. "Which economic uncertainty measure matters for households' portfolio decision?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(2), pages 343-369, June.
    • Handle: RePEc:bla:jfnres:v:44:y:2021:i:2:p:343-369
    DOI: 10.1111/jfir.12243
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