(2005). We extend it by unemployment risk using Markov chains to model the transition between different employment states … systems as those established in the EU are able to offset the negative impact of unemployment risk on the portfolio … persistence. -- Precautionary savings ; unemployment insurance ; long-term unemployment ; income uncertainty …

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 …