Brown et al. (2021) - Journal of Empirical Finance - Accepted version.pdf (607.85 kB)
Download fileHousehold portfolio allocation, uncertainty, and risk
journal contribution
posted on 2021-06-15, 08:46 authored by Sarah Brown, Daniel Gray, Mark Harris, Christopher SpencerChristopher SpencerAnalysing the Panel Study of Income Dynamics and the Health and Retirement Study,
we investigate the extent to which US households reduce their financial risk exposure when confronted with background risk. Our novel modelling approach – termed a deflated ordered fractional
model – quantifies how the overall composition of a household portfolio with three asset classes
adjusts with background risk, and is unique in recovering for any given risky asset class the shares
that are reallocated to each safer asset category. Background risk exerts a significant impact on
household portfolios, inducing a ‘flight from risk’ from riskier to safer assets.
Funding
Australian Research Council (ARC)
History
School
- Business and Economics
Department
- Economics