Wealth Composition and the Demand for Risky Assets
Resource
Academia Economic Papers,32(1),1-22.
Journal
Academia Economic Papers
Journal Volume
32
Journal Issue
1
Pages
1-22
Date Issued
2004-03
Date
2004-03
Author(s)
Chen, Mingshen,
Abstract
Most economic and finance literature only sheds light on the relationship between an individual’s level of wealth, rather than the composition of wealth, and his/ her portfolio choice. In this research we provide a two-period analytical framework, which deliberately explores the relationship between an individual’s wealth composition and portfolio selection. We develop a simpler analytical framework than Bodie et al. (1992) and yet obtain a more specific prediction regarding the relationship among an individual’s wealth composition, labor supply characteristics, and risky asset investment. We divide one’s endowed wealth into “human wealth” and “financial wealth”, and find that people with different wealth compositions have different propensities to invest in risky assets under very plausible assumptions.
SDGs
Type
journal article