Hedging Permanent Income Shocks

• 成果类型: Article; Early Access
• 署名作者: Bagliano, Fabio C.; Corvino, Raffaele; Fugazza, Carolina; Nicodano, Giovanna
• 署名单位: University of Turin; Collegio Carlo Alberto; NEOMA Business School; Centre for Economic Policy Research - UK
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2024.06893
• 发表日期: 2025
• 关键词: Stock market participation; earnings co-movements; aggregate shocks

摘要

This paper robustly connects observed portfolio choices to correlations of individual income shocks with an aggregate shock (or, equivalently, with stock market returns). The share of nonparticipating individuals displaying a positive correlation, and therefore a negative hedging demand for stocks, is above 79% in both our samples. Furthermore, correlations predict nonparticipation to the equity market, also out-of-sample and for the same individual over time. These results support the traditional hedging motive explanation for nonparticipation. Such new insight owes to the income shocks comovements across individuals, which we model and exploit to identify correlations.