Life-cycle hypothesis, propensities to save, and demand for financial assets

Jan Tin

Journal of Economics and Finance, 2000, vol. 24, issue 2, 110-121

Abstract: In recent decades, the United States has not only experienced great economic changes in the financial markets but also undergone tremendous social and demographic transformations. Based on the life-cycle theory of consumption and saving, Keynes’s concept of marginal propensity to save, and Friedman’s theory of asset demand, this study shows that changes in sociodemographic conditions have significant impacts on the saving behavior of individuals in the financial markets. Findings indicate that the amounts of savings held in financial institutions for transactions, precautionary, and speculative motives differ substantially among individuals with divergent socio-economic characteristics. Regression results also show that individuals with different demographic backgrounds differ greatly in their propensities to save and hold financial assest with different degrees of liquidity and risk. Copyright Springer 2000

Date: 2000
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DOI: 10.1007/BF02752707

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