Twin picks: Disentangling the determinants of risk-taking in household portfolios

Laurent Calvet and Paolo Sodini

No 13, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: This paper investigates risk-taking in the liquid portfolios held by a large panel of Swedish twins. We document that the portfolio share invested in risky assets is an increasing and concave function of financial wealth, leading to different risk sensitivities across investors. Human capital, which we estimate directly from individual labor income, also drives risk-taking positively, while internal habit and expenditure commitments tend to reduce it. Our micro findings lend strong support to decreasing relative risk aversion and habit formation preferences. Furthermore, heterogeneous risk sensitivities across investors help reconcile individual preferences with representative-agent models.

Keywords: Asset allocation; communication; genetics; habit formation; human capital; labor income; leverage; participation; risk-taking; social interactions; twin study (search for similar items in EconPapers)
JEL-codes: C23 D14 G11 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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https://www.econstor.eu/bitstream/10419/88722/1/775694029.pdf (application/pdf)

Related works:
Journal Article: Twin Picks: Disentangling the Determinants of Risk-Taking in Household Portfolios (2014)
Working Paper: Twin picks: disentangling the determinants of risk-taking in household portfolios (2011)
Working Paper: Twin Picks: Disentangling the Determinants of Risk-Taking in Household Portfolios (2011)
Working Paper: Twin Picks: Disentangling the Determinants of Risk-Taking in Household Portfolios (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:13

DOI: 10.2139/ssrn.2244168

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