Do wealth fluctuations generate time-varying risk aversion? Italian micro-evidence on household asset allocation

Giuseppe Cappelletti

No 845, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Data from the Italian Survey of Households Income and Wealth (SHIW) are used to study portfolio allocations change in response to fluctuations in wealth. In particular I test for the prediction of models with habit formation that changes in liquid wealth will affect households' risk aversion and risky asset investment. After controlling for the decision to enter and leave the risky asset market, I find, in contrast with other studies (Brunnermeier and Nagel, 2008 and Chiappori and Paiella, 2008), that changes in wealth do help to explain changes in asset allocation.

Keywords: portfolio allocation; risk aversion; habit-formation (search for similar items in EconPapers)
JEL-codes: D14 D31 G11 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_845_12

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