Consumption smoothing and portfolio rebalancing
Subtitle: the effects of adjustment costs
By: Yosef Bonaparte, Russell Cooper, Guozhong Zhu
Contributors: Cooper, Russell; Zhu, Guozhong; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16957; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16957.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "This paper studies the dynamics of portfolio rebalancing and consumption smoothing in the presence of non-convex portfolio adjustment costs.  The goal is to understand a household's response to income and return shocks.  The model includes the choice of two assets: one riskless without adjustment costs and a second risky asset with adjustment costs.  With these multiple assets, a household can buffer some income fluctuations through the asset without adjustment costs and engage in costly portfolio rebalancing less frequently.  We estimate both preference parameters and portfolio adjustment costs.  The estimates are used for evaluating consumption smoothing and portfolio adjustment in the face of income and return shocks"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/23/2011.

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