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How Much Should Life-Cycle Investors Adapt Their Behavior When Confronted with Model Uncertainty?

Shen, Sally - 2016

I investigate a dynamic life-cycle strategic asset allocation and consumption problem under model uncertainty, where both inflation rate and income growth rate are assumed to be estimated with errors. I present a feasible boundary for the uncertainty aversion parameter, which measures the...

Persistent link: https://www.econbiz.de/10012997223

Prudence and Robustness as Explanations for Precautionary Savings : An Evaluation

Draper, Nick - 2009

This paper evaluates approximation methods to make manageable the numerical solution of overlapping generation models with aggregate risk. The paper starts with a model in which households maximize expected utility over their life cycle. Instantaneous utility is characterized by constant...

Persistent link: https://www.econbiz.de/10014212559

Robust Long-Term Interest Rate Risk Hedging in Incomplete Bond Markets

Shen, Sally - 2015

We introduce a robust investment strategy to hedge long dated liabilities under model misspecification and incomplete bond markets. A robust agent who worries about misspecified bond premia follows a min-max expected shortfall criterion to protect against model uncertainty. We employ a backward...

Persistent link: https://www.econbiz.de/10013028258

Individuals’ Uncertainty about Future Social Security Benefits and Portfolio Choice

Rohwedder, Susann - 2010

Little is known about the degree to which individuals are uncertain about their future Social Security benefits, how this varies within the U.S. population, and whether this uncertainty influences financial decisions related to retirement planning. To illuminate these issues, we present...

Persistent link: https://www.econbiz.de/10013136091

Financial Risk Aversion and Personal Life History

Bucciol, Alessandro - 2013

Though risk attitude is central to economics and finance, relatively little is known about how it is formed and how it changes over time. Based on US data from a dedicated psycho-social module on lifestyle of the 2010 Health and Retirement Study (HRS), we provide new evidence on the correlation...

Persistent link: https://www.econbiz.de/10013072823

Quantifying Ambiguity Bounds Through Hypothetical Statistical Testing

Balter, Anne - 2018

meaning to the amount of ambiguity …

Persistent link: https://www.econbiz.de/10012936651

Consumption and Portfolio Choice under Loss Aversion and Endogenous Updating of the Reference Level

van Bilsen, Servaas - 2017

We explicitly derive and explore the optimal consumption and portfolio policies of a loss- averse individual who endogenously updates his reference level over time. We find that he protects his current consumption by delaying painful reductions in consumption after a drop in wealth, and...

Persistent link: https://www.econbiz.de/10012972365

Ambiguity Aversion and Household Portfolio Choice Puzzles : Empirical Evidence

Dimmock, Stephen G. - 2016

We test the relation between ambiguity aversion and five household portfolio choice puzzles: non-participation in … representative U.S. household survey, we measure ambiguity preferences using custom-designed questions based on Ellsberg urns. As … theory predicts, ambiguity aversion is negatively associated with stock market participation, the fraction of financial …

Persistent link: https://www.econbiz.de/10013007875

Reverse Mortgages : What Homeowners (Don't) Know and How it Matters

Davidoff, Thomas - 2015

Reverse mortgages help elderly homeowners to unlock and consume home equity while continuing residing in their homes. Demand for reverse mortgage is far behind predictions. Based on a survey of U.S. homeowners aged 58 we assess product knowledge (literacy) and its relation to reverse mortgage...

Persistent link: https://www.econbiz.de/10013016914

Return Expectations and Risk Aversion Heterogeneity in Household Portfolios

Bucciol, Alessandro - 2015

We develop a structural econometric model to elicit household-specific expectations about future financial asset returns and risk attitudes by using data on observed portfolio holdings and self-assessed willingness to bear financial risk. Our framework assumes that household portfolios are...

Persistent link: https://www.econbiz.de/10013027836

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