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Portfolio choice and risk attitudes: a household bargaining approach

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  • Tansel Yilmazer
  • Stephen Lich

Abstract

The goal of this study is to understand how the households decide on portfolio asset allocation when the husband and wife have different risk preferences. Using data from the Health and Retirement Study for 1992–2006, we show that the share of risky assets in portfolios of two-person households increases with the risk tolerance of the spouse who has more bargaining power. The risk tolerance of the spouse who has less bargaining power does not seem to affect the share of household wealth allocated to risky assets. These results are consistent with a cooperative bargaining framework where the investment in risky assets depends on the bargaining power of the more risk tolerant spouse. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Tansel Yilmazer & Stephen Lich, 2015. "Portfolio choice and risk attitudes: a household bargaining approach," Review of Economics of the Household, Springer, vol. 13(2), pages 219-241, June.
    • Handle: RePEc:kap:reveho:v:13:y:2015:i:2:p:219-241
    DOI: 10.1007/s11150-013-9207-8
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    2. Ran Gu & Cameron Peng & Weilong Zhang, 2021. "The gender gap in household bargaining power: a portfolio-choice approach," IFS Working Papers W21/11, Institute for Fiscal Studies.
    3. Luc Arrondel & Nicolas Frémeaux, 2013. ""For richer, for poorer": savings preferences and choice of spouse," PSE Working Papers halshs-00786245, HAL.
    4. Boto-García, David & Bucciol, Alessandro, 2023. "Couple and individual willingness to take risks," Journal of Economic Psychology, Elsevier, vol. 99(C).
    5. Jianmei Zhao & Lele Zhao, 2022. "Mobile payment adoption and the decline in China’s household savings rate," Empirical Economics, Springer, vol. 63(5), pages 2513-2537, November.
    6. Markus Grabka & Jan Marcus & Eva Sierminska, 2015. "Wealth distribution within couples," Review of Economics of the Household, Springer, vol. 13(3), pages 459-486, September.
    7. Dimitris Christelis & Dimitris Georgarakos & Tullio Jappelli, 2020. "Financial Risk-taking and Differential Bargaining Power within Households," Working Papers 2020_32, Business School - Economics, University of Glasgow.
    8. Kokot, Johanna, 2017. "Does a spouse's health shock influence the partner's risk attitudes?," Ruhr Economic Papers 707, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    9. ROSSI Cristina & SIERMINSKA Eva, 2015. "Single again? Saving patterns when widowhood occurs," LISER Working Paper Series 2015-04, Luxembourg Institute of Socio-Economic Research (LISER).
    10. Donni, Olivier & Molina, José Alberto, 2018. "Household Collective Models: Three Decades of Theoretical Contributions and Empirical Evidence," IZA Discussion Papers 11915, Institute of Labor Economics (IZA).
    11. Nataliya Barasinska & Dorothea Schäfer, 2018. "Gender role asymmetry and stock market participation – evidence from four European household surveys," The European Journal of Finance, Taylor & Francis Journals, vol. 24(12), pages 1026-1046, August.
    12. Ya-Hui Wang & Chien-Chih Lai, 2015. "The Effect of Limit Order Book Information on Investors with Different Risk Attitudes," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 9(1), pages 113-120.
    13. Ciji Song & Yi Yang & Zengji Song, 2024. "The impact of entrepreneurs’ wives participating in corporate management on company risk-taking," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-10, December.
    14. Cheuk Hee Cheung & Tansel Yilmazer, 2019. "Wealth Management While Dealing with Memory Loss," Journal of Family and Economic Issues, Springer, vol. 40(3), pages 470-485, September.
    15. Fernandes, Inês & Schmidt, Tobias, 2021. "Household bargaining, pension contributions and retirement expectations: Evidence from the German Panel on Household Finances," Discussion Papers 44/2021, Deutsche Bundesbank.
    16. Pierre-André Chiappori & José Alberto Molina, 2019. "The intra-spousal balance of power within the family: cross-cultural evidence," Boston College Working Papers in Economics 983, Boston College Department of Economics.
    17. Nicholas Magnan & Abby M. Love & Fulgence J. Mishili & Ganna Sheremenko, 2020. "Husbands’ and wives’ risk preferences and improved maize adoption in Tanzania," Agricultural Economics, International Association of Agricultural Economists, vol. 51(5), pages 743-758, September.
    18. HanNa Lim & Su Hyun Shin & Melissa J. Wilmarth & Narang Park, 2022. "Who Decides? Financial Decision-Making Among Older Couples," Journal of Family and Economic Issues, Springer, vol. 43(2), pages 310-337, June.

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