This research develops a stochastic model of the consumer's decision making under an environment of risk and uncertainty. In the proposed model agents perceive that a mixed diffusionjump process drives the exchange rate depreciation and a diffusion process governs the real interest rate, these...

Using longitudinal data from PSID, we show the positive relation between labor income and the equity share of financial wealth is stronger for those who have a higher persistence in shocks to permanent labor income. The results support the hypothesis that the cross sectional variation in...

Using the Bank of Italy’s Survey of Household Income and Wealth (SHIW) covering a 5-year panel, we measure the impact of the degree of households’ financial literacy on their portfolio imbalance towards housing investment. We find that households with higher levels of financial literacy hold...

Risk may induce precautionary saving but it can also reduce saving. The theoretical literature recognizes both possibilities, but favors a positive effect (both for developed and developing countries); the empirical literature is divided, reporting (small) positive effects for developed...

This paper provides a two-part empirical analysis on how actuarial reduction rates for early retirement affect current pension payments in Germany and to what extent the existence and the magnitude of these reduction rates influence people s retirement planning. First, by evaluating a large...

If the consumers risk aversion behavior varies intertemporally and if the risk aversion coefficient on future consumption becomes very large, the consumer tends to aim at a fixed future consumption target. A by-product is a reinterpretation of subsistence theories of consumption.

This paper reconstructs the series of the real returns on Italian equities, bank and PO deposits and long-term government bonds from 1860 to today. In the long-run the return on shares was much higher than that on government securities and also that on bank and PO deposits. However, this summary...

We analytically show that a common across rich/poor individuals Stone-Geary utility function with subsistence consumption in the context of a simple two-asset portfolio-choice model is capable of qualitatively and quantitatively explaining: (i) the higher saving rates of the rich, (ii) the...

Using trading data from Finland and the US, I empirically show that investors tend to buy riskier stocks following realized losses. The measure of risk that the investors seem to pay attention to is the market beta of a stock. This behavior of buying higher beta stocks after a realized loss is...