Year: 2001
Type: article
Abstract: ABSTRACT This paper examines how risky labor income and retirement affect optimal portfolio choice. With idiosyncratic labor income risk, the optimal allocation to stocks is unambiguously larger for employed investors than for retired investors, consistent with the typical recommendations of investment advisors. Increasing idiosyncratic labor income risk raises investors' willingness to save and reduces their stock portfolio allocation towards the level of retired investors. Positive correlation between labor income and stock returns has a further negative effect and can actually reduce stockholdings below the level of retired investors.
Source: The Journal of Finance
Author: Luis M. Viceira
Institutions: Center for Economic and Policy Research, National Bureau of Economic Research, Harvard University, University of California, Los Angeles, Duke University, Cornell University, University of Chicago, Centre for Economic Policy Research, University of Rochester, Columbia University, Stanford University
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
Funder: Banco de España
OpenAlex ID: W3023965996