The Research On Income Uncertainty, Life Cycle And Portfolio Choice

Recent studies found that most Chinese households choose to hold risk-free financial assets(such as time deposits,demand deposits,etc.)and less risky financial assets.For most low-and middle-income families,weak financial awareness is normal.The asset selection of households does not follow the expectations of the classic portfolio theory.This poses a challenge to the theory of asset allocation.However,with the accumulation of household wealth,the development of China's financial market,and the in-depth study of family financial behavior is of great significance.Using data from the 2011 and 2013 China Household Finance Surveys(CHFS),this paper examines the relationship between income uncertainty,life cycle and household portfolio choice.This paper studies the impact of income uncertainty on family participation in the stock market,financial market,household equity holdings and the proportion of risky financial assets.The paper also examines the distribution of household income uncertainty at the life cycle level and the impact of income uncertainty on household portfolio choice at all ages.Taking into account the heterogeneity of family samples,this paper discusses the urban and rural areas and the length of education in groups.This paper mainly draws the following basic conclusions :(1)Income uncertainty has a significant negative impact on stock market participation and financial market participation,as well as on stock ownership ratio and risky asset ownership ratio.(2)When the head of household is between 20 and 40 years old,income uncertainty has a significant negative impact on the choice of household assets.When the head of household is between 40 and 50,income uncertainty only has a significant effect on whether the family participates in the stock market.When the head of household is over 50,the impact of income uncertainty on household asset selection is no longer significant.(3)Income uncertainty only has a negative impact on whether households in urban areas participate in the stock market.Whether to participate in the financial market,income uncertainty has a greater negative impact on households in rural areas,which is about three times that of urban area.Income uncertainty has a more significant negative impact on the proportion of risky assets held in rural areas,which is about five times that of households in urban areas.