Precautionary Portfolio Behavior from a Life-Cycle Perspective

Carol C. Bertaut and Michael Haliassos
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Carol C. Bertaut: Board of Governors of the Federal Reserve System

Finance from University Library of Munich, Germany

Abstract: The literature on household asset accumulation draws a sharp distinction between "short-run" precautionary motives to buffer consumption from annual income shocks, and "long-run" life cycle considerations under income certainty. However, estimates of shock persistence imply considerable career uncertainty. We study long-run precautionary motives for life-cycle wealth accumulation and portfolios allowing for uncertain returns, incomes, and lifespan. We separate the effects of various factors on mean and median asset holdings, including education, risk aversion, household heterogeneity, bequests, impatience, variance and serial correlation of income shocks. Numerical solutions are compared with data from the 1992 Survey of Consumer Finances.

Keywords: precautionary saving; income risk; CCAPM; life-cycle models (search for similar items in EconPapers)
JEL-codes: E21 E44 G11 (search for similar items in EconPapers)
Pages: 39 pages
Date: 1996-04-19
Note: Type of Document - WordPerfect 5.1/5.2; prepared on IBM PC ; to print on HP; pages: 39; figures: request from author. Please note that the paper size is A4.
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Related works:
Journal Article: Precautionary portfolio behavior from a life-cycle perspective (1997)
Working Paper: Precautionary portfolio behavior from a life-cycle perspective (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:9604001

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