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Life Cycle Portfolio Choice: A Swiss Perspective

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Author Info
Florian Zainhofer
Abstract

We use panel data from the Swiss Labor Force Survey to estimate age-earnings profiles as well as transitory and permanent income shock variances for investor groups distinguished by gender, education and activity rate. Estimation results are then used to stylize several different Swiss investor types. Finally, we determine optimal life cycle consumption, savings and risky asset share for these investor types using a recent computational life cycle model of portfolio choice suggested by Cocco et al. (2005). We are particularly interested in the allocation differences between investor types and their normative implications.

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Publisher Info
Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

Volume (Year): 143 (2007)
Issue (Month): II (June)
Pages: 187-238
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ses:arsjes:2007-ii-4

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Related research
Keywords: Personal finance; financial planning; life cycle model; portfolio choice;

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Find related papers by JEL classification:
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
D14 - Microeconomics - - Household Behavior - - - Personal Finance
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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  1. Lillard, Lee A, 1977. "Inequality: Earnings vs. Human Wealth," American Economic Review, American Economic Association, vol. 67(2), pages 42-53, March.
  2. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January. [Downloadable!] (restricted)
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    Other versions:
  5. Francisco Gomes & Alexander Michaelides, 2005. "Optimal Life-Cycle Asset Allocation: Understanding the Empirical Evidence," Journal of Finance, American Finance Association, vol. 60(2), pages 869-904, 04. [Downloadable!] (restricted)
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  6. Alfonso Sousa-Poza & Fred Henneberger, 2000. "Wage data collected by telephone interviews: an empirical analysis of the item nonresponse problem and its implications for the estimation of wage functions," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 136(I), pages 79-98, March. [Downloadable!]
  7. Steven J. Davis & Felix Kubler & Paul Willen, 2005. "Borrowing costs and the demand for equity over the life cycle," Working Papers 05-7, Federal Reserve Bank of Boston. [Downloadable!]
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  8. Samuelson, Paul A, 1969. "Lifetime Portfolio Selection by Dynamic Stochastic Programming," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 239-46, August. [Downloadable!] (restricted)
  9. R. C. Merton, 1970. "Optimum Consumption and Portfolio Rules in a Continuous-time Model," Working papers 58, Massachusetts Institute of Technology (MIT), Department of Economics.
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  10. Lillard, Lee A & Willis, Robert J, 1978. "Dynamic Aspects of Earning Mobility," Econometrica, Econometric Society, vol. 46(5), pages 985-1012, September. [Downloadable!] (restricted)
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  11. John Y. Campbell & Joao F. Cocco & Francisco J. Gomes & Pascala J. Maenhout, 2000. "Investing Retirement Wealth? A Life-Cycle Model," Harvard Institute of Economic Research Working Papers 1896, Harvard - Institute of Economic Research. [Downloadable!]
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  12. Hall, Robert E & Mishkin, Frederic S, 1982. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," Econometrica, Econometric Society, vol. 50(2), pages 461-81, March. [Downloadable!] (restricted)
    Other versions:
  13. Lillard, Lee A & Weiss, Yoram, 1979. "Components of Variation in Panel Earnings Data: American Scientists, 1960-70," Econometrica, Econometric Society, vol. 47(2), pages 437-54, March. [Downloadable!] (restricted)
  14. Michael Haliassos and Alexander Michaelides, 2001. "Calibration and Computation of Household Portfolio Models," Computing in Economics and Finance 2001 194, Society for Computational Economics. [Downloadable!]
  15. Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002. "Consumption Over the Life Cycle," Econometrica, Econometric Society, vol. 70(1), pages 47-89, January. [Downloadable!] (restricted)
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  16. Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-57, August. [Downloadable!] (restricted)
  17. Michael Gerfin, 1994. "Income Distribution, Income Inequality and Life Cycle Effects - A Nonparametric Analysis for Switzerland," Diskussionsschriften dp9405, Universitaet Bern, Departement Volkswirtschaft.
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  18. Cornelia Luchsinger & Rafael Lalive & Jörg Wild, 2003. "Do Wages Rise with Job Seniority? The Swiss Case," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 139(II), pages 207-229, June. [Downloadable!]
  19. Queisser, Monika & Vittas, Dimitri, 2000. "The Swiss multi-pillar pension system : triumph of common sense?," Policy Research Working Paper Series 2416, The World Bank. [Downloadable!]
  20. Carroll, Christopher D. & Samwick, Andrew A., 1997. "The nature of precautionary wealth," Journal of Monetary Economics, Elsevier, vol. 40(1), pages 41-71, September. [Downloadable!] (restricted)
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  21. Alejandra Cattaneo & Rainer Winkelmann, 2005. "Earnings Differentials between German and French speakers in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 141(II), pages 191-212, June. [Downloadable!]
    Other versions:
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