Expected Horizon and Household Finance

Christophe Spaenjers and Sven Michael Spira
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Sven Michael Spira: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: Using data from a U.S. household survey, we examine the empirical relation between subjective life horizon (i.e., the self-reported expectation of remaining life span) and portfolio choice. We find that equity portfolio shares are higher for investors with longer horizons, controlling for gender-specific age effects, socio-economic characteristics, health, and optimism. Our result is robust to accounting for the endogeneity of equity market participation or instrumenting subjective life horizon with parental survival. Finally, we show that the effect of a shortening horizon on portfolio allocation is stronger for households without bequest motives.

Keywords: portfolio choice; investment horizon; subjective expectations; life expectancy; bequests (search for similar items in EconPapers)
Date: 2013-01-12
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-02002787

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