Does Household Finance Matter? Small Financial Errors with Large Social Costs

• 成果类型: Article
• 署名作者: Bhamra, Harjoat S.; Uppal, Raman
• 署名单位: Imperial College London; Center for Economic & Policy Research (CEPR)
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20161076
• 发表日期: 2019
• 页码: 1116-1154
• 关键词: portfolio choice; intertemporal substitution; long-run; market participation; general equilibrium; risk-aversion; asset; consumption; MODEL; STOCK

摘要

Households with familiarity biases tilt their portfolios toward a few risky assets. The resulting mean-variance loss from portfolio underdiversification is equivalent to only a modest reduction of about 1 percent per year in a household's portfolio return. However, once we consider also the effect of familiarity biases on the asset-allocation and intertemporal consumption-savings decisions, the welfare loss is multiplied by a factor of four. In general equilibrium, the suboptimal decisions of households distort also aggregate growth, amplifying further the overall social welfare loss. Our findings demonstrate that financial markets are not a mere sideshow to the real economy and that improving the financial decisions of households can lead to large benefits, not just for individual households, but also for society.