Countercyclical Risks, Consumption, and Portfolio Choice: Theory and Evidence

• 成果类型: Article
• 署名作者: Shen, Jialu
• 署名单位: University of Missouri System; University of Missouri Columbia
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4837
• 发表日期: 2024
• 页码: 2862-2882
• 关键词: countercyclical earnings risk; countercyclical consumption risk; business cycles; life-cycle portfolio choice and consumption

摘要

Using a quantitative, calibrated life-cycle model, I show that countercyclical earnings risk affects individual consumption growth, reduces the share of wealth in stocks, and affects savings behavior. Using the Panel Study of Income Dynamics survey, I construct an empirical measure of countercyclical earnings risk and find evidence consistent with the model's predictions. Specifically, larger downside earnings risk decreases consumption growth, increases left skewness in consumption growth, and reduces the share of wealth in stocks. Furthermore, the consumption effects are substantially more significant for stockholders than for nonstockholders, which arises through heterogeneity in the elasticity of intertemporal substitution.