Temperant portfolio choice and background risk: evidence from France

Luc Arrondel, Hector Calvo Pardo and Xisco Oliver

Abstract: We explore empirically whether earnings uncertainty and borrowing constraints deter households from the stockmarket, consistent with the predictions of theoretical studies of portfolio choice in the presence of uninsurable earnings. Recent extensions highlight the importance of the correlation between earnings and financial risks. We use a self-assessed proxy for the correlation from the DELTA-TNS 2002 cross-sectional survey. While income risk does not deter from the stockmarket those households' reporting a negative correlation, it does for those who report a non-negative sign, consistent with economic theory predictions.

Keywords: portfolio choice; background risk; risk aversion; prudence; temperance (search for similar items in EconPapers)
Date: 2007-06
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00588069v1
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Working Paper: Temperant portfolio choice and background risk: evidence from France (2007)
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