Stock holdings over the life cycle: Who hesitates to join the market? |
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Institution: | 1. School of Banking and Finance, University of International Business and Economics, Beijing 100029, People''s Republic of China;2. Mailman School of Public Health, Columbia University, New York 10032, United States;3. UQ Business School, University of Queensland, Brisbane QLD 4072, Australia;1. Eastern Mediterranean University, Cyprus;2. Southern Illinois University Edwardsville, United States;1. Orthopaedic Surgeon Holland Arthritis Center, University of Toronto, 43 Wellesley St East, Toronto, Ontario M4Y 1H1;2. Personal Injury Lawyer, Goldman Sloan LLP, Toronto, Ontario;1. Instituto de Física, Universidad Nacional Autónoma de México, D.F. 04510, Mexico;2. Centro de Ciencias de la Complejidad, Universidad Nacional Autónoma de México, D.F. 04510, Mexico |
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Abstract: | In this paper, we study the empirical relationship between age and individual wealth held in stocks, focusing on the heterogeneity of risk-taking over the life cycle in the population. We use micro-data and nonparametric quantile regression to argue that there is a pronounced life cycle pattern of risk-taking for households, which is conditional upon ownership. Specifically, we show that the fraction of stock investment decreases to bottom significantly in midlife and increases afterwards, contradicting the popular evidence claiming a hump-shaped pattern. The pressure of large financial obligations during middle age may be the reason for the crowding out of stock market risk-taking and could induce low capital returns for households. |
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Keywords: | Life cycle Stock market participation Targeting Nonparametric quantile regression Raking |
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