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Temperant portfolio choice and background risk: evidence from France

Author

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  • Luc Arrondel

    (PSE - Paris School of Economics, PJSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Hector Calvo Pardo

    (School of Social Sciences - Economics division - University of Southampton [Southampton])

  • Xisco Oliver

    (UIB - Universitat de les Illes Balears)

Abstract

We explore empirically whether earnings uncertainty and borrowing constraints deter households from the stockmarket, consistent with the predictions of theoretical studies of portfolio choice in the presence of uninsurable earnings. Recent extensions highlight the importance of the correlation between earnings and financial risks. We use a self-assessed proxy for the correlation from the DELTA-TNS 2002 cross-sectional survey. While income risk does not deter from the stockmarket those households' reporting a negative correlation, it does for those who report a non-negative sign, consistent with economic theory predictions.

Suggested Citation

  • Luc Arrondel & Hector Calvo Pardo & Xisco Oliver, 2007. "Temperant portfolio choice and background risk: evidence from France," Working Papers halshs-00588069, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00588069
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00588069
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    References listed on IDEAS

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