The Impact of Major Life Events on Australian Household Financial Decision-Making and Portfolio Rebalancing

We use household-level longitudinal data to gain insights into the asset portfolio rebalancing responses of households experiencing a severe financial shock. The four major life events we consider are serious illness or injury, death of a spouse, being fired or made redundant, and separation from a spouse alongside 11 asset classes. We use Tobit models to assess the impact of the life events on asset class shares and the magnitude and duration of the financial shocks over time. We find that serious illness and injury, loss of employment, and separation cause households to rebalance portfolios