Risky Asset Holding and Labour Income Risk: Evidence from Italian Households

Abstract: Household portfolio choice problem has been in debate for a long time, and it be- comes more relevant nowadays. Substantial works have been done to understand the relationship between labour income risk and risky asset holding, despite that inconsistent empirical relationships are revealed. In this paper, we investigate the age-variant effects of labour income risk on households participation decision and risky asset share with data from the Italian Survey on Household Income and Wealth (SHIW). The results under the narrow definition of risky assets suggest that the risky asset share of the middle-aged households are less influenced by labour income risk, compared to the young and the elderly households. These results are robust to alternative measure of labour income risk.