Financial Windfalls, Portfolio Allocations, and Risk Preferences

Joseph S. Briggs, David Cesarini, Sean Chanwook Lee, Erik Lindqvist and Robert Östling

No 31864, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate the impact of financial windfalls on household portfolio choices and risk exposure. Exploiting the randomized assignment of lottery prizes in three Swedish lotteries, we find a windfall gain of $100K leads to a 5-percentage-point decrease in the risky share of household portfolios. We show theoretically that negative wealth effects are consistent with both constant and decreasing relative risk aversion and analyze how our empirical estimates help distinguish between competing models of portfolio choice. We further show our results are quantitatively aligned with the predictions of a calibrated dynamic portfolio choice model with nontradable human capital and consumption habits.

JEL-codes: G11 G5 (search for similar items in EconPapers)
Date: 2023-11
New Economics Papers: this item is included in nep-eur, nep-rmg and nep-upt
Note: AP
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w31864.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
Working Paper: Financial Windfalls, Portfolio Allocations, and Risk Preferences (2023)
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:nbr:nberwo:31864

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w31864
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().