Households face earnings risk which is non-normal and varies by age and over the income distribution. We show that … assets. Because households are subject to more background risk than previously considered, the estimated model implies a … substantially lower coefficient of risk aversion. We also find renewed support for rule-of-thumb investment strategies under the …

financial behavior. We find that private consumption is excessively sensitive to dividend income. Investors across wealth …

rises in wealth in the cross-section of households in the Survey of Consumer Finances. For a given household, the portfolio … share can fall in response to an increase in wealth, even though the model implies decreasing relative risk aversion …

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 …We investigate the determinants of a household's decision on whether to invest in risky financial assets. Financial …

From standard portfolio-choice theory it is well-understood that background risk, overwhelmingly due to wage risk, is … one of the central determinants of individuals’ portfolio composition: higher background risk reduces risky investments …. However, if background risk is negatively correlated with financial market risk, higher background risk implies more risky …