Understanding the Heterogeneity of Savings and Asset Allocation: A Behavioral-Economics Perspective

Johannes Binswanger ()

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Abstract: Why do saving rates and the proportion of savings invested in stocks substantially increase with income? This paper sheds light on this question from the perspective of a new bounded-rationality life cycle model. It has been shown elsewhere that this model is better than existing ones at predicting how savings and asset allocation choices vary over the life cycle. In this paper it is shown that a very simple version of the same model also allows for a better understanding of the variation in savings and asset allocation choices across income groups.

Keywords: Behavioral economics; bounded rationality; income heterogeneity; life cycle saving; portfolio choice; stock market participation.; D81; D91.; stock market participation; D91 (search for similar items in EconPapers)
Date: 2010-10-06
Note: View the original document on HAL open archive server: https://hal.science/hal-00870188
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Citations: View citations in EconPapers (6)

Published in Journal of Economic Behavior and Organization, 2010, 76 (2), pp.296. ⟨10.1016/j.jebo.2010.06.010⟩

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Journal Article: Understanding the heterogeneity of savings and asset allocation: A behavioral-economics perspective (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00870188

DOI: 10.1016/j.jebo.2010.06.010

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