Risk-adjusted valuation in the worker's economic decision making

Hangsuck Lee, Doojin Ryu and Jihoon Son

Finance Research Letters, 2022, vol. 46, issue PB

Abstract: We suggest a risk-adjusted valuation approach for workers at retirement risk to make decisions in an overlapping generations economy. The risk-averse workers use greater weights than expected, so-called risk-adjusted probability, on their retirement cash flows to assess the residual lifetime income. This method can be consistently applied to value financial and non-financial assets, and on the risk-adjusted valuations, the workers will make optimal investments. To predict capital returns and economic variables, comparative statics will be numerically implemented via demographic structure, preference, and social security policy by aggregating workers’ decisions.

Keywords: Capital returns; Overlapping generations model; Risk-adjusted valuation (search for similar items in EconPapers)
JEL-codes: D91 E10 G32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321004037

DOI: 10.1016/j.frl.2021.102408

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