Analytical Guidance for Fitting Parsimonious Household-Portfolio Models to Data

Sylwia Hubar, Christos Koulovatianos and Jian Li ()
Additional contact information
Jian Li: Goethe University Frankfurt, House of Finance, Germany

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: Saving rates and household investment in stocks and business equity are all increasing in income and wealth. Introducing subsistence consumption to a common-across-households Epstein-Zin-Weil utility function is up to a quantitative explanation, in the context of stan- dardized parsimonious household-portfolio models with risky income. Closed forms in a sim- pli?fied version of the model, with insurable labor-income risk and no liquidity constraints, reveal that if, (i) risky-asset returns are weakly correlated and, (ii) household resources are expected to grow over time, then poorer households can afford exiting subsistence concerns slowly by saving less and by taking less risk, while holding balanced portfolios.

Keywords: Epstein-Zin-Weil recursive preferences; subsistence consumption; household-portfolio shares; business equity; wealth inequality (search for similar items in EconPapers)
JEL-codes: D11 D14 D81 D91 E21 G11 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-upt
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hdl.handle.net/10993/12222 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:13-16

Access Statistics for this paper

More papers in DEM Discussion Paper Series from Department of Economics at the University of Luxembourg Contact information at EDIRC.
Bibliographic data for series maintained by Marina Legrand ().