Journal Article
Lifecycle investment decisions and labor income risk
Abstract: The optimal proportion of financial wealth placed in stocks versus risk-free bonds changes over an investor's life and is very sensitive to the long-run correlation between stock returns and labor income. If this correlation is assumed to be high, then the optimal proportion of stock is hump-shaped and approximately zero for young agents, in contrast to the claims of financial advisers and most academic models.
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Bibliographic Information
Provider: Federal Reserve Bank of San Francisco
Part of Series: FRBSF Economic Letter
Publication Date: 2010
Order Number: 21