Income Volatility and Portfolio Choices

Yongsung Chang, Jay Hong, Marios Karabarbounis, Yicheng Wang and Tao Zhang
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Tao Zhang: University of Oslo

Review of Economic Dynamics, 2022, vol. 44, 65-90

Abstract: Based on administrative data from Statistics Norway, we find economically significant shifts in households’ financial portfolios around individual structural breaks in labor-income volatility. According to our estimates, when income risk doubles, households reduce their risky share of financial assets by 5 percentage points, thus tempering their overall risk exposure. We show that our estimated risky share response is consistent with a standard portfolio choice model augmented with idiosyncratic, time-varying income volatility. (Copyright: Elsevier)

Keywords: Income volatility; Portfolio choice; Risky share (search for similar items in EconPapers)
JEL-codes: E2 G1 J3 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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Working Paper: Income Volatility and Portfolio Choices (2020)
Working Paper: Income Volatility and Portfolio Choices (2020)
Working Paper: Income Volatility and Portfolio Choices (2018)
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DOI: 10.1016/j.red.2021.04.004

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