Income hedging and portfolio decisions

• 成果类型: Article
• 署名作者: Bonaparte, Yosef; Korniotis, George M.; Kumar, Alok
• 署名单位: University of Colorado System; University of Colorado Denver; University of Miami
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2014.05.001
• 发表日期: 2014
• 页码: 300-324
• 关键词: market participation; asset allocation; Income risk-return correlation; Temporary and permanent income shocks; household finance

摘要

We examine whether the decision to participate in the stock market and other related portfolio decisions are influenced by income hedging motives. Economic theory predicts that the market participation propensity should increase as the correlation between income growth and stock market returns decreases. Surprisingly, empirical studies find limited support for the income hedging motive. Using a rich, unique Dutch data set and the National Longitudinal Survey of the Youth (NLSY) from the United States, we show that when the income-return correlation is low, individuals exhibit a greater propensity to participate in the market and allocate a larger proportion of their wealth to risky assets. Even when the income risk is high, individuals exhibit a higher propensity to participate in the market when the hedging potential is high. These findings suggest that income hedging is an important determinant of stock market participation and asset allocation decisions. (C) 2014 Elsevier B.V. All rights reserved.