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Federal Reserve Bank of Boston
Working Papers
Occupation-level income shocks and asset returns: their covariance and implications for portfolio choice
Steven J. Davis
Paul S. Willen
Abstract

This paper develops and applies a simple graphical approach to portfolio selection that accounts for covariance between asset returns and an investor's labor income. Our graphical approach easily handles income shocks that are partly hedgeable, multiple risky assets, multiple risky assets, many periods, and life cycle considerations.


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Steven J. Davis & Paul S. Willen, Occupation-level income shocks and asset returns: their covariance and implications for portfolio choice, Federal Reserve Bank of Boston, Working Papers 13-9, 24 Oct 2013, revised 24 Oct 2013.
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Keywords: life cycle portfolio choice; risky labor income; graphical approach; occupation-level income shocks
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