Empirical analysis of Swiss labor income dynamics


Before the methodology established in the previous chapter can be applied and a life cycle model of portfolio choice adapted to the Swiss context can be derived to study the fundamental research objectives of chapter 2, an important finding of chapter 3 must be recalled: there, a review of earlier life cycle models of portfolio choice revealed that the investor’s labor income dynamics play a crucial role in determining optimal portfolio choice over the life cycle. Variations in the labor income process can account for substantial differences in life cycle asset holdings. Thus, it would e.g. not be appropriate to employ the age-earnings profiles and earnings variances estimated by Cocco et al. (2005) from US data to calibrate a model of Swiss second pillar employees here.


Labor Income Portfolio Choice Life Cycle Model Variable Variable Description Life Cycle Asset 
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© Gabler | GWV Fachverlage GmbH, Wiesbaden 2008

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