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Purpose-The purpose of this paper is to empirically analyze the relationship between risky asset allocation and background risk of Chinese residents.Design/methodology/approach-Using Chinese macroeconomic data,this study uses numerical method to solve dynamic stochastic optimal problem.Findings-When risk of labor income is considered,ratio of risky asset declines with rising of age for those people with same age and wealth state;any of the following situations will lead to lower risky assets holdings:lower labor income growth expectations,higher labor income risk or higher labor and financial market covariance risk.Research limitations/implications-This study uses real economy hnvestment retu as a proxy of risky asset retu.Practical implications-Residents with higher background tisks should hold less risky assets,and overcome home-bias problem during asset allocation.Originality/value-This study takes two kinds of background risk into consideration:labor income risk,and covariance between labor income and risk asset.