Borrowing Constraints, Portfolio Choice and Precautionary Motives: Theoretical Predictions and Empirical Complications

Michael Haliassos () and Christis Hassapis ()
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Christis Hassapis: University of Cyprus

No 1341, Computing in Economics and Finance 1999 from Society for Computational Economics

Abstract: This paper studies the effects of two classes of borrowing constraints, collateral and income based, on wealth accumulation, portfolio behavior, and precautionary motives. We examine the sensitivity of solutions to the tightness of constraints, education levels, and preference parameters. The models are calibrated using the 1992 Survey of Consumer Finances. Our findings may help explain the failure of recent empirical studies to uncover sizable precautionary effects on wealth and on portfolio composition.

New Economics Papers: this item is included in nep-edu
Date: 1999-03-01

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Working Paper: Borrowing Constraints, Portfolio Choice, and Precautionary Motives: Theoretical Predictions and Empirical Complications (1998)
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Persistent link: http://EconPapers.repec.org/RePEc:sce:scecf9:1341

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