TY - JOUR
T1 - Labor market uncertainty and portfolio choice puzzles
AU - Chang, Yongsung
AU - Hong, Jay H.
AU - Karabarbounis, Marios
N1 - Publisher Copyright:
© 2018 American Economic Association.
Copyright:
Copyright 2018 Elsevier B.V., All rights reserved.
PY - 2018/4/1
Y1 - 2018/4/1
N2 - The standard life-cycle models of household portfolio choice have difficulty generating a realistic age profile of risky share. These models not only imply a high risky share on average but also a steeply decreasing age profile, whereas the risky share is mildly increasing in the data. We introduce age-dependent, labor market uncertainty into an otherwise standard model. A great uncertainty in the labor market-high unemployment risk, frequent job turnovers, and an unknown career path-prevents young workers from taking too much risk in the financial market. As labor market uncertainty is resolved over time, workers start taking more risk in their financial portfolios.
AB - The standard life-cycle models of household portfolio choice have difficulty generating a realistic age profile of risky share. These models not only imply a high risky share on average but also a steeply decreasing age profile, whereas the risky share is mildly increasing in the data. We introduce age-dependent, labor market uncertainty into an otherwise standard model. A great uncertainty in the labor market-high unemployment risk, frequent job turnovers, and an unknown career path-prevents young workers from taking too much risk in the financial market. As labor market uncertainty is resolved over time, workers start taking more risk in their financial portfolios.
UR - http://www.scopus.com/inward/record.url?scp=85044738899&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85044738899&partnerID=8YFLogxK
U2 - 10.1257/mac.20160207
DO - 10.1257/mac.20160207
M3 - Article
AN - SCOPUS:85044738899
VL - 10
SP - 222
EP - 262
JO - American Economic Journal: Macroeconomics
JF - American Economic Journal: Macroeconomics
SN - 1945-7707
IS - 2
ER -