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  • The impact of major life events on household asset portfolio rebalancing

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    West234096Accepted.pdf (319.2Kb)
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    Accepted Manuscript (AM)
    Author(s)
    West, Tracey
    Worthington, Andrew
    Griffith University Author(s)
    West, Tracey
    Year published
    2019
    Metadata
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    Abstract
    Purpose: This paper aims to model the asset portfolio rebalancing decisions of Australian households experiencing a severe life event shock. Design/methodology/approach: The paper uses household longitudinal data from the Household, Income, and Labour Dynamics in Australia (HILDA) survey since 2001. The major life events are serious illness or injury, death of a spouse, job dismissal or redundancy and separation from a spouse. The asset classes are bank accounts, cash investments, equities, superannuation (private pensions), life insurance, trust funds, owner-occupied housing, investor housing, business assets, vehicles and ...
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    Purpose: This paper aims to model the asset portfolio rebalancing decisions of Australian households experiencing a severe life event shock. Design/methodology/approach: The paper uses household longitudinal data from the Household, Income, and Labour Dynamics in Australia (HILDA) survey since 2001. The major life events are serious illness or injury, death of a spouse, job dismissal or redundancy and separation from a spouse. The asset classes are bank accounts, cash investments, equities, superannuation (private pensions), life insurance, trust funds, owner-occupied housing, investor housing, business assets, vehicles and collectibles. The authors use both static and dynamic Tobit models to assess the impact and duration of impact of the shocks. Findings: Serious illness and injury, loss of employment, separation and spousal death cause households to rebalance portfolios in ways that can have detrimental effects on long-term wealth accumulation through poor market timing and the incurring of transaction costs. Research limitations/implications: The survey results are only available since 2001, and the wealth module from which the asset data are drawn is self-reported and not available every year. Practical implications: Relevant to policymakers working on the ongoing retirement of the “baby boomer” generation and for financial planners guiding household investment decisions. Originality/value: Most research on shocks to household wealth concern a narrower range of assets and only limited shocks. Also, this is one of the few studies to use a random effects model to allow for unspecified heterogeneity among households.
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    Journal Title
    Studies in Economics and Finance
    Volume
    36
    Issue
    3
    DOI
    https://doi.org/10.1108/SEF-11-2017-0318
    Copyright Statement
    © 2019 Emerald. This is the author-manuscript version of this paper. Reproduced in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
    Subject
    Applied economics
    Social Sciences
    Business, Finance
    Business & Economics
    Asset portfolios
    Household finance
    Publication URI
    http://hdl.handle.net/10072/397429
    Collection
    • Journal articles

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