Twin picks: Disentangling the determinants of risk-taking in household portfolios

  • This paper investigates risk-taking in the liquid portfolios held by a large panel of Swedish twins. We document that the portfolio share invested in risky assets is an increasing and concave function of financial wealth, leading to different risk sensitivities across investors. Human capital, which we estimate directly from individual labor income, also drives risk-taking positively, while internal habit and expenditure commitments tend to reduce it. Our micro findings lend strong support to decreasing relative risk aversion and habit formation preferences. Furthermore, heterogeneous risk sensitivities across investors help reconcile individual preferences with representative-agent models.

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Author:Laurent E. Calvet, Paolo Sodini
Parent Title (German):SAFE working paper series ; No. 13
Series (Serial Number):SAFE working paper (13)
Publisher:Goethe-Univ., House of Finance, Sustainable Architecture for Finance in Europe, SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2013
Year of first Publication:2013
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2013/04/19
Tag:Asset allocation; communication; genetics; habit formation; human capital; labor income; leverage; participation; risk-taking; social interactions; twin study
Page Number:146
Enth.: Internet Appendix for "Twin picks: Disentangling the determinants of risk-taking in household portfolios"
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C2 Single Equation Models; Single Variables / C23 Models with Panel Data
Licence (German):License LogoDeutsches Urheberrecht