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Household Finance: Education, Permanent Income and Portfolio Choice

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  • Guozhong Zhu

    (Peking University)

Abstract

This paper studies household financial choices: why are these decisions dependent on the education level of the household? A life cycle model is constructed to understand a rich set of facts about decisions of households with different levels of education attainment regarding stock market participation, the stock share in wealth, the stock adjustment rate and wealth-income ratio. Model parameters, including preferences, the cost of stock market participation and portfolio adjustment costs, are estimated to match the financial decisions of different education groups. Based on the estimated model, education matters through two channels: the mean of income and the discount factor.

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  • Guozhong Zhu, 2014. "Household Finance: Education, Permanent Income and Portfolio Choice," 2014 Meeting Papers 553, Society for Economic Dynamics.
    • Handle: RePEc:red:sed014:553
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    References listed on IDEAS

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