Hedging Recessions

Publikation: KonferencebidragPaperForskningpeer review

Abstrakt

Traditional life-cycle models conclude that individuals should be fully invested
in stocks when young—in stark contrast to observed stock holdings—and then
gradually replace stocks with bonds as retirement is approaching. We show that a
carefully specified and calibrated model of unemployment risk reduces the earlylife stock holdings dramatically. The reduction is driven by the decline in current
and expected future income caused by unemployment, the relatively high unemployment risk of young adults, and the business cycle variations in un- and
reemployment probabilities that tend to deteriorate exactly when stocks perform
poorly.
OriginalsprogEngelsk
Publikationsdato2019
Antal sider52
StatusUdgivet - 2019
BegivenhedMidwest Finance Association 2019 Annual Meeting - Radisson Blu Aqua Hotel, Chicago, USA
Varighed: 7 mar. 20199 mar. 2019
Konferencens nummer: 68
https://www.openconf.org/MidwestFinance2019/modules/request.php?module=oc_program&action=program.php&p=program

Konference

KonferenceMidwest Finance Association 2019 Annual Meeting
Nummer68
LokationRadisson Blu Aqua Hotel
LandUSA
ByChicago
Periode07/03/201909/03/2019
Internetadresse

Emneord

  • Unemployment risk
  • Business cycle
  • Life-cycle model
  • Portfolio planning

Citationsformater