Household portfolio diversification: A case for rank-dependent preferences

• 成果类型: Article
• 署名作者: Polkovnichenko, V
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; Federal Reserve System - USA; Federal Reserve Bank - Minneapolis
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhi033
• 发表日期: 2005
• 页码: 1467
• 关键词: PROSPECT-THEORY; skewness preference; utility analysis; CHOICE; RISK; equilibrium; SAFETY-1ST; allocation; BEHAVIOR; aversion

摘要

The proliferation of novel preference theories in financial economics is hampered by a lack of non-experimental evidence and by the theories' additional complexity which has not been shown to be critical in applications. In this article I present arguments in support of preferences with rank dependency. Using the Survey of Consumer Finances data, I document two widespread patterns inconsistent with expected utility: (i) many households simultaneously invest in well-deversified funds and in poorly-diversified portfolios of stocks; and (ii) some households with substantial savings do not invest anything in equities. I show that portfolio choice models with rank-dependent preferences, plausibly parameterized and under fully rational assumptions, are quantitatively consistent with the observed diversification. These results call for further efforts to integrate the models of rank-dependent preferences in portfolio theory and asset pricing.