Article (Scientific journals)
Saving Rates and Portfolio Choice with Subsistence Consumption
Koulovatianos, Christos; Achury, Carolina; Hubar, Sylwia
2012In Review of Economic Dynamics, 105 (1), p. 108-126
Peer reviewed
 

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Keywords :
elasticity of intertemporal substitution; Stone-Geary preferences; household portfolios
Abstract :
[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.
Disciplines :
Finance
Identifiers :
UNILU:UL-ARTICLE-2013-085
Author, co-author :
Koulovatianos, Christos  ;  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
Language :
English
Title :
Saving Rates and Portfolio Choice with Subsistence Consumption
Publication date :
2012
Journal title :
Review of Economic Dynamics
ISSN :
1094-2025
Publisher :
Elsevier
Volume :
105
Issue :
1
Pages :
108-126
Peer reviewed :
Peer reviewed
Available on ORBilu :
since 14 October 2013

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