InstEAD Co-Director Professor Sarah Brown gave a research seminar at Nottingham Trent University on 5 December, 2018 on ‘Portfolio Allocation, Income Uncertainty and Households’ Flight from Risk’.
The abstract from the paper is below:
Analysing the US Survey of Consumer Finances and US Panel Study of Income Dynamics, we propose a deflated fractional ordered probit model to investigate the extent to which households reduce their financial risk exposure when confronted with background risk. Background risk exerts a significant impact on household portfolios, resulting in a ‘flight to safety’ away from riskier to safer assets. Our novel modelling approach quantifies how the overall asset composition in a portfolio adjusts with background risk, and is unique in recovering for, any given risky asset class, the shares that are re-allocated to a safer asset.
Download the paper ‘Portfolio Allocation, Income Uncertainty and Households’ Flight from Risk’
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