Intra-household risk sharing in collective portfolio choice models
File(s)
Published online version
Author(s)
Inkmann, Joachim
Michaelides, Alex
Zhang, Yuxin
Type
Journal Article
Abstract
Using a calibrated, collective life-cycle portfolio choice model for a dual-income couple,we show that an increase in the ability to share risk within the household due to a mean-preserving spread in the partners’ coefficients of relative risk aversion leads to a substantial increase in financial risk taking. Importantly, we show that risk sharing has a larger economic impact on portfolio choice than risk diversification. While unitary models usually do not fully replicate the optimal portfolio choice of collective models, we propose approximations that work reasonably well for
moderate background risk. We provide strong empirical support for our key findings.
moderate background risk. We provide strong empirical support for our key findings.
Date Issued
2026-04-27
Date Acceptance
2026-04-03
Citation
Journal of Financial and Quantitative Analysis, 2026, pp.1-37
ISSN
0022-1090
Publisher
Cambridge University Press
Start Page
1
End Page
37
Journal / Book Title
Journal of Financial and Quantitative Analysis
Copyright Statement
© The Author(s), 2026. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington. This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
License URL
Identifier
10.1017/S0022109026102920
Publication Status
Published online
Date Publish Online
2026-04-27