Reference : Saving Rates and Portfolio Choice with Subsistence Consumption
Scientific journals : Article
Business & economic sciences : Finance
http://hdl.handle.net/10993/8519
Saving Rates and Portfolio Choice with Subsistence Consumption
English
Koulovatianos, Christos mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Achury, Carolina [Business School, University of Exeter]
Hubar, Sylwia [Department of Economics, Business School, University of Exeter]
2012
Review of Economic Dynamics
Elsevier
105
1
108-126
Yes (verified by ORBilu)
International
1094-2025
[en] elasticity of intertemporal substitution ; Stone-Geary preferences ; household portfolios
[en] We analytically show that a common across rich/poor individuals Stone-Geary utility function with subsistence consumption in the context of a simple two-asset portfolio-choice model is capable of qualitatively and quantitatively explaining: (i) the higher saving rates of the rich, (ii) the higher fraction of personal wealth held in risky assets by the rich, and (iii) the higher volatility of consumption of the wealthier. On the contrary, time-variant "keeping-up-with-the-Joneses" weighted average consumption which plays the role of moving benchmark subsistence consumption gives the same portfolio composition and saving rates across the rich and the poor, failing to reconcile the model with what micro data say.
http://hdl.handle.net/10993/8519
10.1016/j.red.2011.01.002

File(s) associated to this reference

Fulltext file(s):

FileCommentaryVersionSizeAccess
Open access
AHK_Merton_subsistence_Jan_26_2011_with_Online_Data_Appendix.pdfAuthor preprint30.33 kBView/Open

Additional material(s):

File Commentary Size Access
Open access
Data_Codes_for_AHK_Portfolios_and_Subsistence.zip40.35 kBView/Open

Bookmark and Share SFX Query

All documents in ORBilu are protected by a user license.