Résumé
We study insurance and portfolio decisions, two opposite risk retention tradeoffs. Using household level data, we identify the first joint determinants (e.g. subjective expecta-tions, risk attitude) and frictions (e.g. liquidity constraints, financial literacy) in the literature. We also find key differences between the two decisions. Notably, contrary to economic intuition, risky asset holding and insurance coverage both increase with wealth. We show that this apparent puzzle is driven in part by a specific behavioral pattern (the poor invest too conservatively, while the rich over-insure), and can be explained by two factors: regret avoidance and nonperformance risk.
Codes JEL
- D14: Household Saving; Personal Finance
- D81: Criteria for Decision-Making under Risk and Uncertainty
- C3: Multiple or Simultaneous Equation Models • Multiple Variables
Remplacé par
Olivier Armantier, Jérôme Foncel et Nicolas Treich, « Insurance and portfolio decisions: Two sides of the same coin? », Journal of Financial Economics, vol. 148, n° 3, juin 2023, p. 201–219.
Référence
Olivier Armantier, Jérôme Foncel et Nicolas Treich, « Insurance and Portfolio Decisions: Two Sides of the Same Coin? », TSE Working Paper, n° 23-1425, avril 2023.
Voir aussi
Publié dans
TSE Working Paper, n° 23-1425, avril 2023