Les Cahiers de Recherche - HEC Paris
Subjective Life Horizon and Portfolio Choice
() and Sven Michael Spira
Abstract: Using data from a U.S. household survey, we examine the
empirical relation between subjective life horizon (i.e., the self-reported
expectation of remaining life span) and portfolio choice. We find that
equity portfolio shares are higher for investors with longer horizons,
ceteris paribus, in line with theoretical predictions. This result is
robust to controlling for optimism and health status, accounting for the
endogeneity of equity market participation, or instrumenting subjective
life horizon with parental survival. Finally, we show that bequest motives
can offset the effects of a shortening horizon on portfolio allocation.
Keywords: portfolio choice; investment horizon; subjective expectations; life expectancy; bequests; (follow links to similar papers)
JEL-Codes: D12; D14; D80; D91; G11; (follow links to similar papers)
32 pages, September 4, 2013
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