IDEAS home Printed from https://ideas.repec.org/a/eme/cfripp/v3y2013i2p117-130.html
   My bibliography  Save this article

Household life‐cycle asset allocation and background risk of labor income

Author

Listed:
  • Mingchao Cai
  • Jun Zhao
  • Rulu Pan
  • Haozhi Huang

Abstract

Purpose - The purpose of this paper is to empirically analyze the relationship between risky asset allocation and background risk of Chinese residents. Design/methodology/approach - Using Chinese macroeconomic data, this study uses numerical method to solve dynamic stochastic optimal problem. Findings - When risk of labor income is considered, ratio of risky asset declines with rising of age for those people with same age and wealth state; any of the following situations will lead to lower risky assets holdings: lower labor income growth expectations, higher labor income risk or higher labor and financial market covariance risk. Research limitations/implications - This study uses real economy investment return as a proxy of risky asset return. Practical implications - Residents with higher background risks should hold less risky assets, and overcome home‐bias problem during asset allocation. Originality/value - This study takes two kinds of background risk into consideration: labor income risk, and covariance between labor income and risk asset.

Suggested Citation

  • Mingchao Cai & Jun Zhao & Rulu Pan & Haozhi Huang, 2013. "Household life‐cycle asset allocation and background risk of labor income," China Finance Review International, Emerald Group Publishing Limited, vol. 3(2), pages 117-130, May.
    • Handle: RePEc:eme:cfripp:v:3:y:2013:i:2:p:117-130
    DOI: 10.1108/20441391311330573
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/20441391311330573/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/20441391311330573/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/20441391311330573?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:cfripp:v:3:y:2013:i:2:p:117-130. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.