| In order to achieve asset preservation and appreciation,households should flexibly utilize various financial instruments for asset allocation based on their preferences and constraints.Therefore,diverse financial behaviors are expected to be observed among Chinese households.However,empirical data shows that Chinese household financial behavior,especially asset allocation,is highly homogeneous.Significant features include:(1)The "limited participation" phenomenon of Chinese households in the risk financial market is very pronounced.(2)Human capital is an important "implicit asset" of households,and the commercial insurance market(especially life insurance)provides a compensation mechanism for the loss of household human capital.However,the "limited participation" phenomenon of Chinese households in the commercial insurance market is also very prominent.(3)Finally,the participation rate of Chinese households in the housing market is relatively high,and real estate has become the main asset of Chinese households.From the current research status,the "limited participation" of Chinese households in the risk financial market and the impact of household housing decisions on their participation in the risk financial market have received attention from the academic community.However,research on the "limited participation" of Chinese households in the commercial insurance market and the impact of household housing decisions on their demand for commercial insurance is relatively lacking.From a research perspective,household financial behavior has obvious intertemporal characteristics,but current research lacks dynamic studies on the underlying logic of Chinese household financial behavior and how different financial behaviors are related to each other.The study consists of eight chapters,as follows.Chapter 1,introduction.This chapter describes the research background and significance,identifies the research problem,introduces the research content,methods,and framework,and summarizes the main contributions and limitations of this study.Chapter 2,concept definition and literature review.This chapter first explains the concepts of household,asset allocation and commercial insurance demand in the life-cycle model,followed by a review of the literature on stock market participation,commercial insurance demand,the impact of household housing decisions on asset allocation and commercial insurance demand in household finance research,and household finance research in the life-cycle framework and a brief review of the literature.Chapter 3,empirical facts of household asset allocation and insurance demand in China from a life-cycle perspective.This chapter mainly utilizes CHIP and CFPS data to depict the life-cycle facts of asset-liability and asset allocation of urban and rural households of the same generation from the age of 30 to 52,and uses CHFS data to show the commercial insurance demand of Chinese urban and rural households from 2013 to 2017.It is found that in Chinese households from1995 to 2017,the proportion of risky asset allocation to financial assets has long been maintained at below 10%,and commercial insurance demand,especially the expenditure of commercial life insurance and health insurance,has been basically below 2,000 yuan throughout the life cycle of the household.Chapter 4,the life-cycle benchmark model of asset allocation and commercial insurance demand of Chinese households.This chapter constructs a life-cycle model that includes asset allocation and insurance demand.The model parameters are also calibrated using empirical data from China.The risk aversion coefficient of Chinese households is measured to be about 5.43 using the trading data of Snowball.com investors,and it is also found that Chinese households face greater income risk relative to U.S.households.Chapter 5,the benchmark scenario simulation analysis of the life-cycle model of asset allocation and insurance demand.Based on the life-cycle model constructed in the previous section,this chapter estimates the life-cycle optimal path of Chinese households’ risky asset allocation and commercial insurance demand and conducts sensitivity analysis,and further examines the dynamic association between the securities market and households’ commercial insurance demand.(1)From the perspective of household asset allocation behavior: the estimation results of the model are highly consistent with the empirical facts.An increase in household risk aversion leads to a decrease in the proportion of households’ optimal asset allocation over the entire life cycle,but with diminishing marginal effects.Chinese households’ optimal asset allocation behavior is more sensitive to persistent shocks to labor income;the smaller the persistent shock,the higher the proportion of risky asset holdings,while temporary shocks to labor income have less impact on Chinese households’ asset allocation.Stock market returns have an important impact on household asset allocation,while fluctuations in risky asset returns have less impact.Liquidity shocks due to household home purchases have a greater impact on household asset allocation decisions,especially when households are in the early stages of their life cycle.A comparison of the asset allocation behavior of Chinese and U.S.households reveals that three factors-securities market performance,liquidity shocks from home purchases,and labor income uncertainty-are key to understanding the asset allocation behavior of Chinese households.(2)From the perspective of household commercial insurance demand: the average optimal insured amount for Chinese households at age 20 is4,209,800 RMB,and the optimal insured amount gradually decreases with age.From the perspective of premium expenditure,the average optimal premium expenditure of households at the age of 20-60 is about RMB 4,478.From the perspective of premium-to-income ratio,the premium-to-income ratio of Chinese urban households stays below 5% at the age of 40,and starts to rise rapidly after the age of 40.In terms of premium-to-asset ratio,the premium-to-asset ratio of households after the age of 30 stabilizes at about 1%.Household optimal insurance demand is insensitive to changes in household risk aversion.Human capital differences of households play an important role in the demand for insurance(life insurance).Household home purchase has a significant impact on the demand for commercial insurance,with down payments having a greater impact in the younger years of the household and liquidity constraints due to home mortgage loans having a greater impact in the middle and older years of the household.The existence of commercial insurance market can enhance households’ risky asset allocation,increase households’ consumption and reduce households’ saving rate.(3)From the perspective of the linkage between the securities market and the commercial insurance market: good performance of the securities market,i.e.,an increase in the rate of return on risky assets,boosts households’ demand for commercial insurance,mainly because an increase in the rate of return on risky assets actually raises the value of households’ future human capital.The existence of a corresponding commercial insurance market can also increase households’ risky asset allocation to some extent.Chapter 6,Life-cycle model of asset allocation considering a limited trust insurance market: empirical evidence and simulation analysis.Noting that the theoretical optimal value of dynamic household demand for commercial insurance estimated by the life-cycle benchmark model is significantly higher than the empirical fact,this chapter finds that the lack of trust of Chinese households in the commercial insurance market may be the reason for the deviation of the empirical fact from the theoretical optimal.(1)First,empirical evidence is provided that the "trust mechanism" affects household demand for commercial insurance.(2)This chapter constructs a life-cycle model of asset allocation considering a limited trust insurance market,where the life-cycle optimal insurance demand estimated by the theoretical model is highly consistent with the empirical data.In the framework of the finite-trust life-cycle model,there exists a minimum level of trust regarding the insurance market for each household.When a household’s insurance trust falls below the minimum insurance trust level,the household withdraws from the insurance market,so the "minimum insurance trust level" is a key mechanism for understanding the household’s demand for insurance over the life cycle.In the limited trust insurance market setting,when the risk aversion of a household increases,the household will reduce the demand for insurance.At the same time,household insurance demand becomes insensitive to changes in income risk.The presence of a limited trust insurance market is also found to reduce households’ risky asset allocation.Chapter 7,Housing Debt and Commercial Insurance Demand: Empirical Evidence and Mechanism Analysis Based on the Life Cycle Model.For Chinese households,property investment is perhaps the most significant investment decision.The significant feature of household housing decisions is that households often need to bear housing debt.Therefore,this chapter examines the impact of housing debt on household demand for commercial insurance.Firstly,this chapter provides empirical evidence of the impact of housing debt on household demand for commercial insurance.It is found that housing debt to some extent increases household participation in the commercial insurance market and demand for commercial insurance.Secondly,based on previous literature,wealth effect and liquidity constraints may be the underlying mechanisms by which housing debt affects household demand for commercial insurance.Thirdly,it is found that the life cycle model constructed in the previous section can better explain how housing debt affects household demand for commercial insurance through the mechanisms of wealth effect and liquidity constraints.Through numerical simulation,it is found that when the household housing leverage ratio is less than4.6,the wealth effect dominates.Within this range,housing debt increases household insurance demand.When the household housing leverage ratio is greater than 4.6,liquidity constraints dominate.At this point,increasing housing debt will suppress household insurance demand.Chapter 8,Conclusion,Policy Implications and Outlook.This chapter first briefly summarizes the main findings of the previous paper,presents the corresponding policy implications based on the findings,and secondly looks forward to the follow-up work of this study.Based on the research content and findings mentioned above,the main contributions of this study are as follows:Firstly,it contributes to the research content.Currently,there is relatively little research on the insurance demand of Chinese households in the field of household finance.In addition,research on how Chinese household housing decisions affect insurance demand and how different financial market behaviors of Chinese households interact with each other is also insufficient.This study investigates the dynamic relationships between household asset allocation,commercial insurance demand,and different financial behaviors of households through numerical methods within a unified life cycle framework.The work of this study supplements the literature in these areas of research.Secondly,the contribution of research methodology and perspective.This paper attempts to incorporate Chinese household asset allocation decisions,insurance demand,and housing purchase behavior into a unified life-cycle framework.This framework provides two major advantages for the research in this paper:(1)it enables the examination of the life-cycle optimal path of household asset allocation behavior and insurance demand,and further deepens the understanding of the intrinsic factors that affect household asset allocation and commercial insurance demand through sensitivity analysis;(2)under this unified framework,the dynamic relationship between different financial behaviors of households can be analyzed,such as the correlation between the securities market and the insurance market,and how household housing behavior affects asset allocation and insurance demand.In summary,this study utilizes a life-cycle model to provide new methods and perspectives for the research on Chinese household financial behavior.Thirdly,the contribution to understanding Chinese households’ financial behavior.(1)The simulation study in this paper found that the performance of the securities market,liquidity shock caused by housing purchases,and labor income risk are key factors in understanding the limited participation of Chinese households in the risk asset market.Household human capital and insurance trust are key factors in understanding the commercial insurance demand of Chinese households.(2)In addition,this paper also simulates how different financial market behaviors of households are interconnected throughout their life cycle.(3)In constructing and estimating a life-cycle model in a limited trust insurance market,this paper found that households have different minimum levels of insurance trust throughout their life cycle,which determines whether and when households exit the insurance market.This is the basis for understanding how trust mechanisms affect household insurance demand,and also the key to explaining how household housing debt promotes insurance demand through wealth effect.The above research conclusions provide a comprehensive theoretical inspiration for us to understand Chinese household financial behavior. |
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