Theory suggests that uninsurable income risk induces individuals to accumulate assets as a precautionary reserve of value. Most assets, however, bear rate of return risk, that can be diversified only if every asset is traded by a large number of individuals and arbitrage is frictionless. Using Italian micro-data, we find evidence of income and asset risks that affect consumption. Italian households are particularly well insured against illness but not against job losses. Moreover, we detect a positive, yet weak, effect of asset holding on the variability of consumption streams across households. © 2002 Elsevier Science B.V. All rights reserved.
Labor income and risky assets under market incompleteness: Evidence from Italian data / Giuseppe, Grande; Ventura, Luigi. - In: JOURNAL OF BANKING & FINANCE. - ISSN 0378-4266. - 26:2-3(2002), pp. 597-620. [10.1016/s0378-4266(01)00236-9]
Labor income and risky assets under market incompleteness: Evidence from Italian data
VENTURA, Luigi
2002
Abstract
Theory suggests that uninsurable income risk induces individuals to accumulate assets as a precautionary reserve of value. Most assets, however, bear rate of return risk, that can be diversified only if every asset is traded by a large number of individuals and arbitrage is frictionless. Using Italian micro-data, we find evidence of income and asset risks that affect consumption. Italian households are particularly well insured against illness but not against job losses. Moreover, we detect a positive, yet weak, effect of asset holding on the variability of consumption streams across households. © 2002 Elsevier Science B.V. All rights reserved.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.