This paper examines households’ self-insurance in financial markets when a rare personal disaster, such as disability or long-term unemployment, may occur during working years. Personal disaster risk alters lifetime ex-ante investment choices, even if most workers will not experience a disaster. Uncertainty about the size of human capital losses, which characterizes rare disasters, results in lower risk-taking at the beginning of working life, and is crucial in order to match the observed age profiles of US investors from 1992 to 2016.
Life-cycle risk taking with personal disaster risk
Fabio Bagliano;Carolina Fugazza;Giovanna Nicodano
2021-01-01
Abstract
This paper examines households’ self-insurance in financial markets when a rare personal disaster, such as disability or long-term unemployment, may occur during working years. Personal disaster risk alters lifetime ex-ante investment choices, even if most workers will not experience a disaster. Uncertainty about the size of human capital losses, which characterizes rare disasters, results in lower risk-taking at the beginning of working life, and is crucial in order to match the observed age profiles of US investors from 1992 to 2016.
File in questo prodotto:
| File | Dimensione | Formato | |
|---|---|---|---|
|
esrb.wp132_e1ed0b1124.en.pdf
Accesso aperto
Tipo di file:
PDF EDITORIALE
Dimensione
873.14 kB
Formato
Adobe PDF
|
873.14 kB | Adobe PDF | Visualizza/Apri |
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
