Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96931
Authors: 
Becker, Gideon
Dimpfl, Thomas
Year of Publication: 
2014
Series/Report no.: 
University of Tübingen Working Papers in Economics and Finance 72
Abstract: 
We investigate the determinants of a household's decision on whether to invest in risky financial assets. Financial 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 subjective measures of a household's financial situation (income satisfaction, worries about financial situation), the impact of observed labor income variation vanishes.
Subjects: 
household finance
risky asset market participation
labor income risk
behavioral finance
unobserved heterogeneity
JEL: 
D14
D81
G11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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