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Models For Household Portfolios And Life-Cycle Allocations In The Presence Of Labour Income And Longevity Risk

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  • Costanza Torricelli

Abstract

Campbell (2006) stressed the two main challenges of household finance: empirical analyses that highlight how households do invest (i.e. positive household finance) have important measurement problems, while suggestions about how investments should be made (i.e. normative household finance) encounter modelling problems. In this latter connection the final aim of this paper is to highlight the modelling requirements necessary to analyse the impact of household-specific risks on their portfolios, with special focus on the financial segment. To this end, after an overview of household portfolio theory, special emphasis is given to models incorporating two increasingly more important risks for the household: labour income and longevity risks. The paper concludes with some research directions.

Suggested Citation

  • Costanza Torricelli, 2009. "Models For Household Portfolios And Life-Cycle Allocations In The Presence Of Labour Income And Longevity Risk," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0017, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    • Handle: RePEc:mod:wcefin:0017
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    More about this item

    Keywords

    household financial portfolios; life-cycle consumption and saving; labour income risk; longevity risks; annuities;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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