Committed Expenditure, Consumption Habit Formation And Household Risky Asset Allocation

Household committed expenditure and consumption habit formation will affect optimal risk asset allocation.There are some different forms of commitment expenditure and habit formation,which may have different effects on the allocation of risky asset.So in chapter 3,this paper establishes several theoretical models.The result shows that constant commitment expenditure and habit formation will reduce the allocation of risky asset,but the effect of variable commitment expenditure and habit formation on risky asset allocation depends on the relationship between them and risky asset return rate.Then this paper turns to the micro level by constructing empirical models useing data from questionnaire made in 2015 and designing corresponding variables.The empirical study shows that constant committed expenditure(mortgage)has a significant negative impact on risky asset participation but not on allocation ratio.Volatile committed expenditure(student numbers)doesn't influence significantly both on participation and ratio.Another volatile one(health)can influence significantly on both explained variables,but hedged one(medical insurance)doesn't influence significantly.And external habit formation(overall urban consumption)doesn't influence participation significantly,but will affect allocation ratio positively.Households in different countries show national differences in asset allocation behavior,so this paper analyzes this topic from the macro level in chapter 5.This paper compares family asset allocation behavior and committed expenditure in different countries,and designs a panel regression model studying the influence of macro factors especially committed expenditure on risky asset allocation among OECD countries.The result shows that both household debt and self-paid medical expense,as proxy variables of committed expenditure,will reduce risky asset allocation ratio.