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Estimating heterogeneous costs of participation in the risky asset markets

Author

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  • Graciela Sanromán

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República; CEMFI)

Abstract

This paper develops and estimates a dynamic structural model of participation in the risky financial asset markets using household level panel data. We specify a simple economic model in order to capture the portfolio choice over the life cycle. We solve the model using numerical techniques. Then we embed the optimal solution into the statistical (auxiliary) model and estimate the structural parameters using Generalized Indirect Inference. This paper focuses on the estimation of the non proportional costs to participate in the risky asset markets. We consider heterogeneous costs among education groups. We find that participation costs in the risky asset markets are positive and significant. We also conclude that they vary a lot among education groups.

Suggested Citation

  • Graciela Sanromán, 2007. "Estimating heterogeneous costs of participation in the risky asset markets," Documentos de Trabajo (working papers) 2107, Department of Economics - dECON.
  • Handle: RePEc:ude:wpaper:2107
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    File URL: http://cienciassociales.edu.uy/departamentodeeconomia/wp-content/uploads/sites/2/2013/archivos/2107%20english%20version.pdf
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    Cited by:

    1. Kim Huynh & Philipp Schmidt-Dengler & Gregor W. Smith & Angelika Welte, 2017. "Adoption Costs of Financial Innovation: Evidence from Italian ATM Cards," Staff Working Papers 17-8, Bank of Canada.

    More about this item

    Keywords

    Portfolio choice; dynamic programming; indirect inference;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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