Download or read book Portfolio Choice Over the Life-Cycle when the Stock and Labor Markets are Cointegrated written by Luca Benzoni and published by . This book was released on 2011 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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 electively becomes stock-like. However, for older agents with shorter times - to - retirement, cointegration does not have sufficient time to act, and thus their human capital becomes more bond-like. Together, these exects create hump - shaped life - cycle portfolio holdings, consistent with empirical observation. These results hold even when asset return predictability is accounted for.