Year: 2013
Type: report
Abstract: Saving rates and household investment in stocks and business equity are all increasing in income and wealth. Introducing subsistence consumption to a common-across-households Epstein-Zin-Weil utility function is up to a quantitative explanation, in the context of stan- dardized parsimonious household-portfolio models with risky income. Closed forms in a sim- pli?fied version of the model, with insurable labor-income risk and no liquidity constraints, reveal that if, (i) risky-asset returns are weakly correlated and, (ii) household resources are expected to grow over time, then poorer households can afford exiting subsistence concerns slowly by saving less and by taking less risk, while holding balanced portfolios.
Authors: Sylwia Hubar, Christos Koulovatianos, Jian Li
Institution: University of Luxembourg
Language: English
Subfield: Finance
Domain: Social Sciences
SDG: No poverty
Open Access status: green
OpenAlex ID: W563725236