Time is money: Life cycle rational inertia and delegation of investment management
We investigate the theoretical impact of including two empirically-grounded insights in a dynamic life cycle portfolio choice model. The first is to recognize that, when managing their own financial wealth, investors incur opportunity costs in terms of current and future human capital accumulation, particularly if human capital is acquired via learning by doing. The second is that we incorporate age-varying efficiency patterns in financial decisionmaking. Both enhancements produce inactivity in portfolio adjustment patterns consistent with empirical evidence. We also analyze individuals' optimal choice between self-managing their wealth versus delegating the task to a financial advisor. Delegation proves most valuable to the young and the old. Our calibrated model quantifies welfare gains from including investment time and money costs, as well as delegation, in a life cycle setting.
Year of publication: |
2013
|
---|---|
Authors: | Kim, Hugh H. ; Maurer, Raimond ; Mitchell, Olivia S. |
Publisher: |
Frankfurt a. M. : Goethe University Frankfurt, Center for Financial Studies (CFS) |
Saved in:
freely available
Series: | CFS Working Paper ; 2013/08 |
---|---|
Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 771560400 [GVK] hdl:10419/87683 [Handle] RePEc:zbw:cfswop:201308 [RePEc] |
Source: |
Persistent link: https://www.econbiz.de/10010326667
Saved in favorites
Similar items by person
-
Time is money: Life cycle rational inertia and delegation of investment management
Kim, Hugh H., (2013)
-
How cognitive ability and financial literacy shape the demand for financial advice at older ages
Kim, Hugh H., (2019)
-
Time is money : rational life cycle inertia and the delegation of investment management
Kim, Hugh H., (2016)
- More ...