Tail risks in household finance

Omid M. Ardakani and Rawan Ajina

Finance Research Letters, 2024, vol. 69, issue PA

Abstract: We introduce a measure to quantify shared information within household financial portfolios under extreme events. We employ mutual information and copula entropy to capture tail dependencies among investment assets. We then study the impact of socio-economic factors on proactive financial behaviors using data from the 2022 Survey of Consumer Finances and highlight the necessity for tail-informed diversification strategies. Our findings underscore the importance of accounting for nonlinear dependencies to safeguard against unanticipated risks in extreme market scenarios.

Keywords: Copula models; Extreme value theory; Financial dependencies; Household finance; Information theory; Tail risk (search for similar items in EconPapers)
JEL-codes: C58 D14 G11 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S154461232401095X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:69:y:2024:i:pa:s154461232401095x

DOI: 10.1016/j.frl.2024.106065

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().