A Mean-variance Benchmark for Household Portfolios over the Life Cycle

Claus Munk*

*Corresponding author af dette arbejde

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Abstrakt

We embed human capital as an innate, illiquid asset in Markowitz’ one-period mean-variance framework. By solving the Markowitz problem for different values of the ratio of human capital to financial wealth, we emulate life-cycle effects in household portfolio decisions. The portfolio derived with this simple approach matches the optimal portfolio from the much more complicated dynamic life-cycle models. An application illustrates that young households may optimally refrain from stock investments because a house investment combined with a mortgage is more attractive from a pure investment perspective. Another application examines the theoretical support for the observed growth/value tilts in households’ portfolios.
OriginalsprogEngelsk
Artikelnummer105833
TidsskriftJournal of Banking & Finance
Vol/bind116
Antal sider17
ISSN0378-4266
DOI
StatusUdgivet - jul. 2020

Emneord

  • Life-cycle portfolio decisions
  • Human capital
  • Housing
  • Stock market participation
  • Growth/value tilts

Citationsformater