Household Portfolios and Risk Bearing over Age and Time

We exploit the US Survey of Consumer Finances from 1998 to 2007 to study households’ portfolio risk bearing. We compare four alternative measures of risk, two based on a financial portfolio and two based on a broader portfolio also including – as illiquid assets – human capital, real estate, business wealth and related debt. The measures provide a different ranking of household risk bearing, but they consistently show that risk bearing fell after 2001, and it positively correlates with wealth, income and financial sophistication. Furthermore, the risk-age profile is sensitive to the definition of portfolio, although it looks flat for many years.