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Author : Yoel Lax
Release : 2001
Genre :
Kind : eBook
Book Rating : /5 ( reviews)
Book Synopsis Habit Formation and Lifetime Portfolio Selection by : Yoel Lax
Download or read book Habit Formation and Lifetime Portfolio Selection written by Yoel Lax. This book was released on 2001. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Tarun Gupta
Release : 2010
Genre :
Kind : eBook
Book Rating : 697/5 ( reviews)
Book Synopsis Life-cycle Effects of Internal Habit Formation on Portfolio Choice by : Tarun Gupta
Download or read book Life-cycle Effects of Internal Habit Formation on Portfolio Choice written by Tarun Gupta. This book was released on 2010. Available in PDF, EPUB and Kindle. Book excerpt: The presence of an internal habit, interpreted as a minimum acceptable lifestyle, has important consequences for portfolio choice of agents. The risk aversion of agents varies endogenously through the life cycle depending on evolution of the agent's habit. For the case where total wealth is capitalized, I obtain analytical solutions for the value and policy functions in a continuous time finite horizon model. There is an interesting life cycle effect which I highlight. Younger agents need to sustain their habits for a longer horizon, thereby making them more risk averse and inducing them to optimally hold more conservative portfolios, as compared to older agents who have fewer outstanding periods, hence worry less about sustaining future habits and hold more aggressive portfolios. The model is applied to study portfolio decisions of retired households, in contrast to the standard model it is able to explain the data.
Author : Francisco Gomes
Release : 2008
Genre :
Kind : eBook
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Book Synopsis Portfolio Choice with Internal Habit Formation by : Francisco Gomes
Download or read book Portfolio Choice with Internal Habit Formation written by Francisco Gomes. This book was released on 2008. Available in PDF, EPUB and Kindle. Book excerpt: Motivated by the success of internal habit formation preferences in explaining asset pricing puzzles, we introduce these preferences in a life-cycle model of consumption and portfolio choice with liquidity constraints, undiversifiable labor income risk and stock-market participation costs. In contrast to the initial motivation, we find that the model is not able to simultaneously match two very important stylized facts: A low stock market participation rate, and moderate equity holdings for those households that do invest in stocks. Habit formation increases wealth accumulation because the intertemporal consumption smoothing motive is stronger. As a result, households start participating in the stock market very early in life, and invest their portfolios almost fully in stocks. Therefore, we conclude that, with respect to its ability to match the empirical evidence on asset allocation behavior, the internal habit formation model is dominated by its time-separable utility counterpart.
Author : Francisco J. Gomes
Release : 2003
Genre : Asset allocation
Kind : eBook
Book Rating : /5 ( reviews)
Book Synopsis Portfolio Choice with Internal Habit Formation by : Francisco J. Gomes
Download or read book Portfolio Choice with Internal Habit Formation written by Francisco J. Gomes. This book was released on 2003. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Yacine Ait-Sahalia
Release : 2009-10-19
Genre : Business & Economics
Kind : eBook
Book Rating : 842/5 ( reviews)
Book Synopsis Handbook of Financial Econometrics by : Yacine Ait-Sahalia
Download or read book Handbook of Financial Econometrics written by Yacine Ait-Sahalia. This book was released on 2009-10-19. Available in PDF, EPUB and Kindle. Book excerpt: This collection of original articles—8 years in the making—shines a bright light on recent advances in financial econometrics. From a survey of mathematical and statistical tools for understanding nonlinear Markov processes to an exploration of the time-series evolution of the risk-return tradeoff for stock market investment, noted scholars Yacine Aït-Sahalia and Lars Peter Hansen benchmark the current state of knowledge while contributors build a framework for its growth. Whether in the presence of statistical uncertainty or the proven advantages and limitations of value at risk models, readers will discover that they can set few constraints on the value of this long-awaited volume. Presents a broad survey of current research—from local characterizations of the Markov process dynamics to financial market trading activity Contributors include Nobel Laureate Robert Engle and leading econometricians Offers a clarity of method and explanation unavailable in other financial econometrics collections
