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The well-documented nonparticipation in the stock market by many households and the highly negative correlation between stock and housing investment are puzzling. We show that stock and housing markets are cointegrated, and thus households significantly increase housing expenditure, reduce stock...
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There exists one potential source which has not obtained full treatment in the recent consumption literature: a negative wealth constraint (NWC). An economic agent who faces the NWC can borrow up to a certain proportion of the present value of labor income. We present an analytically tractable...
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We develop a new dynamic continuous-time model of optimal consumption and investment to include independent stochastic labor income. We reduce the problem of solving the Bellman equation to a problem of solving an integral equation. We then explicitly characterize the optimal consumption and...
Persistent link: https://www.econbiz.de/10014253923