Faculty News

Research from New York University Broadens Understanding of Financial Economics

Investment Weekly News
© Copyright 2011 Investment Weekly News via VerticalNews.com

"Young agents with low wealth-income ratios counter factually hold more stock than young, rich agents and old agents using the standard portfolio choice model with i.i.d. stock returns and labor income," researchers in New York City, New York report.

"This paper matches the countercyclical volatility and procyclical mean of United States. labor income and finds that, consistent with United States data, young, poor agents now hold less stock than both young, rich agents and old agents, and no stock a large fraction of the time," wrote A.W. Lynch and colleagues, New York University.

The researchers concluded: "Our results suggest that the predictability of labor income growth at a business-cycle frequency, particularly the countercyclical variation in volatility, plays an important role in a young agent's decision making about her portfolio's stock holding."

Lynch and colleagues published their study in the Journal of Financial Economics (Labor income dynamics at business-cycle frequencies: Implications for portfolio choice. Journal of Financial Economics, 2011;101(2):333-359).

For additional information, contact A.W. Lynch, New York University, Stern School Business, 44 W 4th St., Suite 9-190, New York City, NY 10012, United States.

Publisher contact information for the Journal of Financial Economics is: Elsevier Science SA, PO Box 564, 1001 Lausanne, Switzerland.

This article was prepared by Investment Weekly News editors from staff and other reports. Copyright 2011, Investment Weekly News via VerticalNews.com.