TY  - RPRT
A1  - Achury, Carolina
A1  - Hubar, Sylwia
A1  - Koulovatianos, Christos
T1  - Saving rates and portfolio choice with subsistence consumption : [Version January 16, 2010]
N2  - We analytically show that a common across rich/poor individuals Stone-Geary utility function with subsistence consumption in the context of a simple two-asset portfolio-choice model is capable of qualitatively explaining: (i) the higher saving rates of the rich, (ii) the higher fraction of personal wealth held in stocks by the rich, and (iii) the higher volatility of consumption of the wealthier. On the contrary, time-variant "keeping-up with the Joneses" weighted average consumption playing the role of moving benchmark subsistence consumption gives the same portfolio composition and saving rates across the rich and the poor, failing to reconcile the model with what micro data say.
KW  - elasticity of intertemporal substitution
KW  - Stone-Geary preferences
KW  - two-asset portfolio
KW  - household portfolios
KW  - wealth inequality
KW  - controlled diffusion
Y1  - 2010
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/34106
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-341063
UR  - https://www.essex.ac.uk/ebs/research/efc/seminar_papers/AKH_Merton_subsistence_May_2010.pdf
IS  - Version January 16, 2010
ER  -