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 …

risk differ between agents and the econometrician. Our tests are based on panel data elicited yearly from British … ; income risk ; limited information variances …

We extend the canonical income process with persistent and tran- sitory risk to cyclical shock distributions with left … dispersion and left-skewness. We then show that in a standard incomplete-markets life-cycle model, first, higher- order risk has … sizable welfare implications, which depend on risk atti- tudes; second, it matters quantitatively for the welfare costs of …

We provide a critique of the methods that have been used to derive measures of income risk and draw attention to the … importance of demographic factors as a source of income risk. We also propose new measures of the contribution to total income … risk of demographic and labour market factors. Empirical evidence supporting our arguments is provided using data from the …

This paper examines the institutions that enable households to insure against idiosyncratic risk. Using a decentralized …