theory suggests that with increasing labor income risk, the reluctance of households to hold stocks increases. We propose to … measure income risk as the observed variation of household income over a five year period. We find that indeed higher income … risk reduces the propensity to invest in stocks. However, when controlling for household heterogeneity as well as …

income risk affects equity ownership turnover. A portfolio choice model with an income process extracted from survey data … shows that idiosyncratic income shocks are more important for dynamic equity ownership decisions than aggregate stock market … risk. The model yields realistic estimates for the coefficient of relative risk aversion (= 3.09) and the discount factor …