Search Results
Title: Income Hedging and Portfolio Decisions
Resulting in 1 citation.
| 1. |
Bonaparte, Yosef Korniotis, George M. Kumar, Alok |
|
Income Hedging and Portfolio Decisions Working Paper, Social Science Research Network, July 2013. Also: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2172846 Cohort(s): NLSY79 Publisher: Social Science Electronic Publishing, Inc. Keyword(s): Assets; Financial Behaviors/Decisions; Financial Market Participation; Income Risk; Risk-Taking Permission to reprint the abstract has not been received from the publisher. 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 dataset and the NLSY data from the U.S., 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. |
|
|
Bibliography Citation
Bonaparte, Yosef, George M. Korniotis and Alok Kumar. "Income Hedging and Portfolio Decisions." Working Paper, Social Science Research Network, July 2013. |