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Stock market participation, portfolio choice and pensions over the life-cycle


  • Ball, S.


In this paper we present a calibrated life-cycle model which is able to simultaneously match asset allocations and stock market participation profiles over the life-cycle. The inclusion of per period fixed costs and a public pension scheme eradicates the need to assume heterogeneity in preferences, or implausible parameter values, in order to explain observed patterns. We find a per period fixed cost of less than two percent of the permanent component of annual labour income can explain the limited stock market participation. More generous public pensions are seen to crowd out private savings and significantly reduce the estimates of these fixed costs. This is the first time that concurrent matching of participation and shares has been achieved within the standard preference framework.

Suggested Citation

  • Ball, S., 2007. "Stock market participation, portfolio choice and pensions over the life-cycle," Cambridge Working Papers in Economics 0707, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:0707
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    Cited by:

    1. Jun Zhan, 2015. "Who holds risky assets and how much?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(2), pages 323-370, May.
    2. Roine Vestman, 2013. "Limited Stock Market Participation Among Renters and Home Owners," 2013 Meeting Papers 549, Society for Economic Dynamics.

    More about this item


    precautionary saving; portfolio choice; stock market participation and uninsurable labour income risk;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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