Research On The Life Cycle Effect Of Chinese Household's Risk Asset Selection

The research on household risk asset selection behavior has always been the hot topic in household finance.Risk asset selection behavior includes participation of risk asset and allocation of risk asset.Both domestic and foreign literatures have found that there is an inverted U-shaped life cycle effect in household risk asset selection,which is essentially the age imbalance of limited household participation.At the same time,statistics and prediction of data on China's population structure show that the proportion of elderly families over 60 years old and young people under 30 years old in China has gradually increased in the next 20 years or so.This demonstrates that China will face the challenge of insufficient selection of risk assets in the whole society in the future,which is not conducive to the future supply of funds in China's financial market and the improvement of residents' property income.The selection of household risk asset is a limited rational behavior,and each household will make the most favorable household risk asset selection based on the internal and external factors of the household they are facing.Studying the formation mechanism of “inverted U-shaped” life cycle effect in household risk asset selection is to explore the internal and external factors of the household that lead to the life cycle effect.According to those,the policy is designed to change the internal and external factors of the household and guide the household to make it beneficial to market and household,and finally solves the problem of insufficient selection of potential social risk assets in the whole society,which is also the starting point and ending of this paper.The research content of this thesis includes four aspects:(1)Research on the formation mechanism of household risk asset selection.With regard to the model of selection of household risk assets,most of the existing literature focuses on the study of influencing factors,and less on the formation mechanism.The existing risk asset selection mechanism seldom considers bounded rational assumptions and market failures.On the basis of the monetary asset holding motives mentioned in Keynes' s theory of money demand,the savings motives mentioned in the precautionary savings theory,and the demand hierarchy proposed by the financial demand hierarchy theory,this thesis starts from the bounded rational assumptions and market failures to explore the mechanism of household risk asset selection.This thesis will give an answer about which cases the household will hold risk asset,which will provide a theoreticalbasis for the subsequent interpretation of the life cycle effects of household risk asset selection.The research of this thesis will be carried out from the bounded rational assumptions and market failures,and explore the formation mechanism of household risk asset selection.(2)Research on characteristics,causes and differences of life cycle effects of household risk asset selection.In the existing literatures,the life cycle effect of household risk asset selection is seldom studied from a quantitative perspective.This thesis firstly confirms that there exists the life cycle effect in the household risk asset selection by using the MIC method that can measure nonlinearity correlation.On this basis,this thesis demonstrates that there exist an inverted U-shaped life cycle effect in household risk asset selection.Secondly,the influencing factors of household risk asset selection are investigated by reviewing a great deal of literature.The possible influencing factors with life cycle effects include household income,household wealth,risk preference,years of education and financial knowledge.The research results show that household income,household wealth,years of education and financial knowledge have the inverted U-shaped life cycle effect.And risk preference has an incremental life cycle effect.In addition,the research results show that there are two main differences between the urban and rural areas,and between the eastern and the midwestern regions of China on the life cycle effect of household risk asset selection.The first difference is the regional vertical differences in the life cycle effects of China's household risk asset selection,and the second difference is the regional volatility differences in the life cycle effects of China's household risk asset selection.The explanation for the first difference is as follows: the average urban-rural difference in different age groups on household income,household wealth,household finance knowledge and years of education leads to the vertical difference between urban and rural areas in the life cycle effect of household risk asset selection.And the average eastern and midwestern difference in different age groups on household income and household wealth leads to the vertical difference between eastern areas and midwestern areas in the life cycle effect of household risk assets selection.Moreover,the explanation for the second difference is as follows: the coefficients of variation of the household income,household wealth,household financial knowledge and years of education of rural households are greater than those of urban households,which is the reason why the risk of risk assets selection of rural households;the coefficient of variation of household income and household wealth in the central region and western region is significantly greater than that in the eastern region,resulting in larger fluctuation of risk assets selection in the central and western families.(3)Research on life cycle effect of job stability and its impacts on household risk asset selection.The research results show that the higher the job stability,the higher the participation probability of household risk asset and the allocation rate of household risk asset;the job stability has an incremental life cycle effect;the unemployment insurance is helpful to increase the participation probability of household risk asset and the allocation rate of household risk asset.Based on the above research conclusions,the policy recommendation is to improve the choice of young household risk assets by strengthening the employment security of young people under the age of 30.(4)Research on life cycle effects of concept of self-pension and their impact on household risk asset selection.The research results demonstrate that the concept of self-pension for the elderly will increase the selection of household risk assets;the concept of self-pension has a diminishing life cycle effect,that is,the older the age,the more inclined it is for others to support the elderly;the pension insurance is beneficial to the choice of household risk assets.The policy suggestions presented are: to enhance the concept of self-pension of the elderly and to improve the risk asset selection of the elderly household.The research in this thesis has the following three aspects in theory.The first one is to construct a life cycle effect formation mechanism of choice of household risk assets,and to enrich the theory of household asset selection.The second is to study the causes of imbalance between ages of household risk assets selection,enrich investors the study of“limited participation”.The third is to study the regional imbalance characteristics of household life cycle effects,and to enrich the study of household risk asset selection factors.In the practical sense,policy recommendations are provided in the following three aspects.The first one is to resolve the impact of China's current and future demographic characteristics on financial market supply,the second is to broaden the channels for property income,and the third is to narrow the gap between the rich households and the poor among households.