Many financial advisors and much of the academic literature often argue that young people should place most of their savings in stocks. In contrast, a significant fraction of U.S. households do not hold stocks. Investors typically hold very little in stocks when they are young, progressively...

This review article examines the role of labor income risk in determining the value of a person's human capital. We draw on the existing literature to present a model that incorporates various types of shocks to earnings. Within this framework, we highlight the implications of different...

This review article examines the role of labor income risk in determining the value of a person's human capital. We draw on the existing literature to present a model that incorporates various types of shocks to earnings. Within this framework, we highlight the implications of different...

We study portfolio choice when labor income and dividends are cointegrated. Economically plausible calibrations suggest young investors should take substantial short positions in the stock market. Because of cointegration the young agent's human capital effectively becomes stock-like. However,...

We study portfolio choice when labor income and dividends are cointegrated. Economically plausible calibrations suggest young investors should take substantial short positions in the stock market. Because of cointegration the young agent's human capital effectively becomes "stock-like." However,...

Empirical evidence shows that changes in aggregate labor income and stock market returns exhibit only weak correlation at short horizons. As we document below, however, this correlation increases substantially at longer horizons, which provides at least suggestive evidence that stock returns and...