Predictors and Portfolios Over the Life Cycle

Holger Kraft, Claus Munk, Farina Weiss

Publikation: Working paperForskning

Resumé

In a calibrated consumption-portfolio model with stock, housing, and labor income predictability, we evaluate the welfare effects of predictability on life-cycle consumption-portfolio choice. We compare skilled investors who are able to take advantage of all sources of predictability with unskilled investors ignoring predictability. For an unskilled investor the certainty equivalent of wealth is 0.3-6.8% lower than for a skilled investor, depending on the market entry date. We also determine the effect of luck to enter the market at a favorable time. Across market entry dates, skilled but unlucky investors can lose up to 15.4% compared to unskilled but lucky investors. Simulation studies confirm the relative importance of luck and document that, if anything, housing predictability is more important than stock predictability.
OriginalsprogEngelsk
Udgivelses stedTilburg
UdgiverNetspar
Antal sider59
StatusUdgivet - 2016
NavnNetspar Discussion Paper
Nummer01/2016-010
NavnSAFE Working Paper
Nummer139

Emneord

  • Return predictability
  • Scenarios
  • Welfare
  • Performance
  • Housing

Citer dette

Kraft, H., Munk, C., & Weiss, F. (2016). Predictors and Portfolios Over the Life Cycle. Tilburg: Netspar. Netspar Discussion Paper, Nr. 01/2016-010, SAFE Working Paper, Nr. 139
Kraft, Holger ; Munk, Claus ; Weiss, Farina. / Predictors and Portfolios Over the Life Cycle. Tilburg : Netspar, 2016. (Netspar Discussion Paper; Nr. 01/2016-010). (SAFE Working Paper; Nr. 139).
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Kraft, H, Munk, C & Weiss, F 2016 'Predictors and Portfolios Over the Life Cycle' Netspar, Tilburg.

Predictors and Portfolios Over the Life Cycle. / Kraft, Holger; Munk, Claus; Weiss, Farina.

Tilburg : Netspar, 2016.

Publikation: Working paperForskning

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Kraft H, Munk C, Weiss F. Predictors and Portfolios Over the Life Cycle. Tilburg: Netspar. 2016.