VGSF - WU Vienna - LC

John Y. Campbell, Harvard University

Campus WU D3.0.225 11:00 - 12:30

Organizer VGSF

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes John Y. Camp­bell from Har­vard Uni­versity to present his re­search pa­per.
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Pa­per

The Cross-Sec­tion of House­hold Pref­er­ences

This pa­per es­tim­ates the cross-sec­tional dis­tri­bu­tion of pref­er­ences in a large ad­min­is­trat­ive panel of Swedish house­holds. We con­sider a life-­cycle port­fo­lio choice model which in­cor­por­ates risky labor in­come, safe and risky fin­an­cial as­sets in­side and out­side re­tire­ment ac­counts, and real estate. We study middle-aged house­holds grouped by edu­ca­tion, in­dustry of em­ploy­ment, and birth co­hort as well as by their ac­cu­mu­lated wealth and risky port­fo­lio shares. Our model al­lows for het­ero­gen­eity in risk aver­sion, the elasti­city of in­ter­tem­poral sub­sti­tu­tion (EIS), and the rate of time pref­er­ence. The aver­age value of risk aver­sion is 4.16 and the aver­age EIS is 1.00. The aver­age rate of time pref­er­ence is neg­at­ive at -1.40%, prob­ably a re­flec­tion of be­quest motives that are omit­ted from our life-­cycle model. Key cross-sec­tional pat­terns are high stand­ard de­vi­ations of all three pref­er­ence para­met­ers (1.10, 0.44, and 3.05% re­spect­ively), a higher rate of time pref­er­ence for house­holds who en­ter our sample with low ini­tial wealth, a weak neg­at­ive cor­rel­a­tion between risk aver­sion and the EIS, higher risk aver­sion for co­horts born earlier, and lower risk aver­sion for house­holds with ris­kier labor in­come.



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