Household portfolios include risky bonds, beyond stocks, and respond to permanent labour income shocks. This paper brings these features into a life-cycle setting, and shows that optimal stock investment is constant or increasing in age before retirement for realistic parameter combinations. The...

Traditionally quantitative models that have studied households' port- folio choice have focused exclusively on the different risk properties of alternative financial assets. In the present paper we take a different ap- proach and assume that assets also differ in their liquidity. We construct a...

In this paper we focus on the relative role of job finding and job exit in shaping the employment risk over the life cycle. Using Italian labor market data we document that the risk of being fired and the chance of reemployment display substantial heterogeneity depending on age, cohort and...

Recent research [e.g., DeMiguel, Garlappi and Uppal, (2009a), Rev. Fin. Studies] has cast doubts on the out-of-sample performance of optimizing portfolio strategies relative to a naive, equally-weighted ones. However, most of the existing results concern the simple case in which an investor has...

Do equity markets help diversifying away industry-related labor income risk? This paper reconsiders the hedging role of stock markets by focusing on international equity diversification, rather than domestic asset allocation, and on industry wage, rather than individual labor income. We test for...