Subjective life horizon and portfolio choice

TitleSubjective life horizon and portfolio choice
Publication TypeJournal Article
Year of Publication2015
AuthorsSpaenjers, C, Spira, SMichael
JournalJournal of Economic Behavior & Organization
ISBN Number0167-2681
KeywordsBequests, Investment horizon, Life Expectancy, Portfolio choice, Subjective Expectations

Using data from a U.S. household survey, we examine the empirical relation between subjective life horizon (i.e., the self-reported expectation of remaining life span) and portfolio choice. We find that equity portfolio shares are higher for investors with longer horizons, controlling for gender-specific age effects, socio-economic characteristics, health, and optimism. Our result is robust to accounting for the endogeneity of equity market participation or instrumenting subjective life horizon with parental survival. Finally, we show that the effect of a shortening horizon on portfolio allocation is stronger for households without bequest motives.

Citation Key11440