Portfolio Choice and Precautionary Savings

Riccardo Calcagno () and Mariacristina Rossi
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Riccardo Calcagno: EMLYON Business School & CeRP Collegio Carlo Alberto

Economics Bulletin, 2011, vol. 31, issue 2, 1353-1361

Abstract: We study the effect on savings of an increase in the capital risk of the investment opportunities when the representative consumer is allowed to optimally choose her portfolio. Sandmo (1970) and Levhari and Srinivasan (1969) prove that individuals with high risk-aversion and time-separable, power utility increase their optimal savings when capital risk increases holding constant the expected return of the risky asset. We obtain the opposite effect when the consumer chooses her portfolio allocation optimally.

Keywords: Precautionary Saving; Capital Risk; Portfolio Allocation; Life Cycle Savings. (search for similar items in EconPapers)
JEL-codes: E2 G0 (search for similar items in EconPapers)
Date: 2011-05-12
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Citations: View citations in EconPapers (2)

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http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I2-P126.pdf (application/pdf)

Related works:
Working Paper: Portfolio choice and precautionary savings (2011)
Working Paper: Portfolio Choice and Precautionary Savings (2010)
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