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Briggs, Joseph S. [Author]; Cesarini, David [Author]; Lee, Sean Chanwook [Author]; Lindqvist, Erik [Author]; Östling, Robert [Author] ; National Bureau of Economic Research

Financial Windfalls, Portfolio Allocations, and Risk Preferences

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  • Media type: E-Book
  • Title: Financial Windfalls, Portfolio Allocations, and Risk Preferences
  • Contributor: Briggs, Joseph S. [Author]; Cesarini, David [Author]; Lee, Sean Chanwook [Author]; Lindqvist, Erik [Author]; Östling, Robert [Author]
  • Corporation: National Bureau of Economic Research
  • Published: Cambridge, Mass: National Bureau of Economic Research, November 2023
  • Published in: NBER working paper series ; no. w31864
  • Extent: 1 Online-Ressource; illustrations (black and white)
  • Language: English
  • Keywords: Privater Haushalt ; Glücksspiel ; Privatvermögen ; Anlageverhalten ; Risikopräferenz ; Schweden ; Portfolio Choice; Investment Decisions ; Household Finance ; Arbeitspapier ; Graue Literatur
  • Reproduction note: Hardcopy version available to institutional subscribers
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  • Description: We investigate the impact of financial windfalls on household portfolio choices and risk exposure. Exploiting the randomized assignment of lottery prizes in three Swedish lotteries, we find a windfall gain of $100K leads to a 5-percentage-point decrease in the risky share of household portfolios. We show theoretically that negative wealth effects are consistent with both constant and decreasing relative risk aversion and analyze how our empirical estimates help distinguish between competing models of portfolio choice. We further show our results are quantitatively aligned with the predictions of a calibrated dynamic portfolio choice model with nontradable human capital and consumption habits