Labor market uncertainty and portfolio choice puzzles

Yongsung Chang, Jay H. Hong, Marios Karabarbounis

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)


The standard life-cycle models of household portfolio choice have difficulty generating a realistic age profile of risky share. These models not only imply a high risky share on average but also a steeply decreasing age profile, whereas the risky share is mildly increasing in the data. We introduce age-dependent, labor market uncertainty into an otherwise standard model. A great uncertainty in the labor market-high unemployment risk, frequent job turnovers, and an unknown career path-prevents young workers from taking too much risk in the financial market. As labor market uncertainty is resolved over time, workers start taking more risk in their financial portfolios.

Original languageEnglish
Pages (from-to)222-262
Number of pages41
JournalAmerican Economic Journal: Macroeconomics
Issue number2
Publication statusPublished - 2018 Apr 1

Bibliographical note

Publisher Copyright:
© 2018 American Economic Association.

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)


Dive into the research topics of 'Labor market uncertainty and portfolio choice puzzles'. Together they form a unique fingerprint.

Cite this