Federal Reserve Bank of Boston
Occupation-level income shocks and asset returns: their covariance and implications for portfolio choice
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.
Cite this item
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.
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
Keywords: life cycle portfolio choice; risky labor income; graphical approach; occupation-level income shocks
This item with handle RePEc:fip:fedbwp:13-9
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