Estimating heterogeneous costs of participation in the risky asset markets

Graciela Sanromán
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Graciela Sanromán: Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República; CEMFI

No 2107, Documentos de Trabajo (working papers) from Department of Economics - dECON

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.

Keywords: Portfolio choice; dynamic programming; indirect inference (search for similar items in EconPapers)
JEL-codes: C15 C61 D14 D91 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-edu and nep-lam
Date: 2007-06

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Persistent link: http://EconPapers.repec.org/RePEc:ude:wpaper:2107

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