Replication data for: Do Wealth Fluctuations Generate Time-Varying Risk Aversion? Micro-evidence on Individuals

We use data from the Panel Study of Income Dynamics to investigate how households portfolio allocations change in response to wealth fluctuations. Persistent habits, consumption commitments, and subsistence levels can generate time-varying risk aversion with the consequence that when the level of liquid wealth changes, the proportion a household invests in risky assets should also change in the same direction. In contrast, our analysis shows that the share of liquid assets that households invest in risky assets is not affected by wealth changes. Instead, one of the major drivers of household portfolio allocation seems to be inertia: households rebalance only very slowly following inflows and outflows or capital gains and losses.

The following publications are supplemented by the data in this project.

• Brunnermeier, Markus K, and Stefan Nagel. “Do Wealth Fluctuations Generate Time-Varying Risk Aversion? Micro-Evidence on Individuals’ Asset Allocation.” American Economic Review 98, no. 3 (May 2008): 713–36. https://doi.org/10.1257/aer.98.3.713.

• Brunnermeier, Markus, and Stefan Nagel. “Supplementary Data for: Do Wealth Fluctuations Generate Time-Varying Risk Aversion? Micro-Evidence on Individuals.” ICPSR - Interuniversity Consortium for Political and Social Research, 2024. https://doi.org/10.3886/E211642V2.